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The Life Satisfaction Approach to Environmental Valuation

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  • Bruno S. Frey
  • Simon Luechinger
  • Alois Stutzer

Abstract

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) representing a new non-market 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. Micro-econometric 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.

Suggested Citation

  • Bruno S. Frey & Simon Luechinger & Alois Stutzer, 2009. "The Life Satisfaction Approach to Environmental Valuation," CESifo Working Paper Series 2836, CESifo.
  • Handle: RePEc:ces:ceswps:_2836
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    More about this item

    Keywords

    life satisfaction approach; subjective well-being; non-market valuation; cost-benefit analysis; air pollution;
    All these keywords.

    JEL classification:

    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
    • I31 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - General Welfare, Well-Being
    • Q51 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Valuation of Environmental Effects
    • Q53 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Air Pollution; Water Pollution; Noise; Hazardous Waste; Solid Waste; Recycling

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