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The Life Satisfaction Approach to Environmental Valuation

  • Bruno S. Frey
  • Simon Luechinger
  • Alois Stutzer


    (Institute for Empirical Research in Economics, University of Zurich, 8006 Zurich, Switzerland
    KOF Swiss Economic Institute, Swiss Federal Institute of Technology, 8092 Zurich, Switzerland
    Department of Business and Economics, University of Basel, 4002 Basel, Switzerland)

In many countries, environmental policies and regulations are implemented to improve environmental quality and thus individuals' well-being. However, how do individuals value the environment? In this paper, we review the life satisfaction approach (LSA), which represents a new nonmarket valuation technique. The LSA builds on the recent development of subjective well-being research in economics and takes measures of reported life satisfaction as an empirical approximation to individual welfare. Microeconometric life satisfaction functions are estimated, taking into account environmental conditions along with income and other covariates. The estimated coefficients for the environmental good and income can then be used to calculate the implicit willingness to pay for the environmental good.

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Article provided by Annual Reviews in its journal Annual Review of Resource Economics.

Volume (Year): 2 (2010)
Issue (Month): 1 (October)
Pages: 139-160

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Handle: RePEc:anr:reseco:v:2:y:2010:p:139-160
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