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

  • Daniel Fujiwara
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    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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    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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    7. Arik Levinson, 2009. "Valuing Public Goods Using Happiness Data: The Case of Air Quality," Working Papers gueconwpa~09-09-03, Georgetown University, Department of Economics.
    8. Susana Ferreira & Mirko Moro, 2010. "On the Use of Subjective Well-Being Data for Environmental Valuation," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 46(3), pages 249-273, July.
    9. Ada Ferrer-i-Carbonell & Paul Frijters, 2002. "How important is Methodology for the Estimates of the Determinants of Happiness?," Tinbergen Institute Discussion Papers 02-024/3, Tinbergen Institute.
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    12. John Knight & Lina Song, 2007. "Subjective Well-being and its Determinants in Rural China," Economics Series Working Papers 334, University of Oxford, Department of Economics.
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