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A general method for valuing non-market goods using wellbeing data: three-stage wellbeing valuation

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  • Fujiwara, Daniel

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.

Suggested Citation

  • Fujiwara, Daniel, 2013. "A general method for valuing non-market goods using wellbeing data: three-stage wellbeing valuation," LSE Research Online Documents on Economics 51577, London School of Economics and Political Science, LSE Library.
  • Handle: RePEc:ehl:lserod:51577
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    File URL: http://eprints.lse.ac.uk/51577/
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    References listed on IDEAS

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    1. Susana Ferreira & Mirko Moro, 2010. "On the Use of Subjective Well-Being Data for Environmental Valuation," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 46(3), pages 249-273, July.
    2. Paul Dolan & Robert Metcalfe, 2008. "Comparing Willingness-to-Pay and Subjective Well-Being in the Context of Non-Market Goods," CEP Discussion Papers dp0890, Centre for Economic Performance, LSE.
    3. KNIGHT, John & SONG, Lina & GUNATILAKA, Ramani, 2009. "Subjective well-being and its determinants in rural China," China Economic Review, Elsevier, vol. 20(4), pages 635-649, December.
    4. Nattavudh Powdthavee, 2010. "How much does money really matter? Estimating the causal effects of income on happiness," Empirical Economics, Springer, vol. 39(1), pages 77-92, August.
    5. Levinson, Arik, 2012. "Valuing public goods using happiness data: The case of air quality," Journal of Public Economics, Elsevier, vol. 96(9-10), pages 869-880.
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    7. Erzo F. P. Luttmer, 2005. "Neighbors as Negatives: Relative Earnings and Well-Being," The Quarterly Journal of Economics, Oxford University Press, vol. 120(3), pages 963-1002.
    8. Bruno S. Frey & Alois Stutzer, 2002. "What Can Economists Learn from Happiness Research?," Journal of Economic Literature, American Economic Association, vol. 40(2), pages 402-435, June.
    9. Gardner, Jonathan & Oswald, Andrew J., 2007. "Money and mental wellbeing: A longitudinal study of medium-sized lottery wins," Journal of Health Economics, Elsevier, vol. 26(1), pages 49-60, January.
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    Cited by:

    1. Murtin, Fabrice & Boarini, Romina & Cordoba, Juan Carlos & Ripoll, Marla, 2017. "Beyond GDP: Is there a law of one shadow price?," European Economic Review, Elsevier, vol. 100(C), pages 390-411.
    2. repec:eee:epplan:v:64:y:2017:i:c:p:116-126 is not listed on IDEAS

    More about this item

    JEL classification:

    • C39 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Other
    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
    • I31 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - General Welfare, Well-Being
    • J68 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Public Policy

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