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A General Method for Valuing Non-Market Goods Using Wellbeing Data: Three-Stage Wellbeing Valuation

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  • Daniel Fujiwara
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    Abstract

    Subjective wellbeing data is becoming increasingly popular in economics research. The wellbeing valuation approach uses wellbeing data instead of data gleaned from preferences to attach monetary values to non-market goods. This method could be an important alternative to preference-based valuation methods such as contingent valuation, but there are a number of significant technical deficiencies with the current methodology. It is argued that the current method derives biased estimates of the value of non-market goods. The paper presents Three-Stage Wellbeing Valuation, a new approach to valuation using subjective wellbeing data that solves for the main technical problems and as a result derives estimates of welfare change and value that are consistent with welfare economic theory. As an example, I derive robust values associated with unemployment using the new approach and compare these to biased values derived from the standard wellbeing valuation method. Values derived from Three-Stage Wellbeing Valuation can be used in cost-benefit analysis.

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    Bibliographic Info

    Paper provided by Centre for Economic Performance, LSE in its series CEP Discussion Papers with number dp1233.

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    Date of creation: Jul 2013
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    Handle: RePEc:cep:cepdps:dp1233

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    Web page: http://cep.lse.ac.uk/_new/publications/series.asp?prog=CEP

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    Keywords: subjective wellbeing; non-market valuation; cost-benefit analysis; unemployment; causal inference;

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    1. Paul Dolan & Robert Metcalfe, 2008. "Comparing Willingness-to-Pay and Subjective Well-Being in the Context of Non-Market Goods," CEP Discussion Papers, Centre for Economic Performance, LSE dp0890, Centre for Economic Performance, LSE.
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    8. Ferreira, Susana & Moro, Mirko, 2009. "On the Use of Subjective Well-Being Data for Environmental Valuation," Stirling Economics Discussion Papers, University of Stirling, Division of Economics 2009-24, University of Stirling, Division of Economics.
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    10. Nattavudh Powdthavee, 2010. "How much does money really matter? Estimating the causal effects of income on happiness," Empirical Economics, Springer, Springer, vol. 39(1), pages 77-92, August.
    11. Levinson, Arik, 2012. "Valuing public goods using happiness data: The case of air quality," Journal of Public Economics, Elsevier, Elsevier, vol. 96(9-10), pages 869-880.
    12. KNIGHT, John & SONG, Lina & GUNATILAKA, Ramani, 2009. "Subjective well-being and its determinants in rural China," China Economic Review, Elsevier, Elsevier, vol. 20(4), pages 635-649, December.
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