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Potential Use of the Life Satisfaction Approach to Value Nonmarket Goods and Services

Author

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  • Fernandez, Cheryl Joy

    (Asian Development Bank)

  • Raitzer, David

    (Asian Development Bank)

  • Ginting , Edimon

    (Asian Development Bank)

Abstract

Economic analysis often faces challenges in the valuation of nonmarket goods and services. The traditional set of nonmarket valuation tools for measuring Marshallian economic surplus has limitations related to potential bias in stated preferences and endogeneity of nonmarket amenity placement in revealed preference studies. The life satisfaction approach offers a Hicksian compensating variationbased alternative, which uses self-reported subjective well-being to calculate the marginal rate of substitution of income for nonmarket amenities or services. The conceptual basis for the approach is explained and illustrated with an example from Iloilo, Philippines. Recommendations are offered for future application of the technique in the economic analysis of investment projects.

Suggested Citation

  • Fernandez, Cheryl Joy & Raitzer, David & Ginting , Edimon, 2019. "Potential Use of the Life Satisfaction Approach to Value Nonmarket Goods and Services," ADB Economics Working Paper Series 569, Asian Development Bank.
    • Handle: RePEc:ris:adbewp:0569
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    References listed on IDEAS

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    1. Bernard M. S. van Praag & Barbara E. Baarsma, 2005. "Using Happiness Surveys to Value Intangibles: The Case of Airport Noise," Economic Journal, Royal Economic Society, vol. 115(500), pages 224-246, January.
    2. Welsch, Heinz & Biermann, Philipp, 2014. "Electricity supply preferences in Europe: Evidence from subjective well-being data," Resource and Energy Economics, Elsevier, vol. 38(C), pages 38-60.
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    4. Vemuri, Amanda W. & Costanza, Robert, 2006. "The role of human, social, built, and natural capital in explaining life satisfaction at the country level: Toward a National Well-Being Index (NWI)," Ecological Economics, Elsevier, vol. 58(1), pages 119-133, June.
    5. Tsurumi, Tetsuya & Managi, Shunsuke, 2015. "Environmental value of green spaces in Japan: An application of the life satisfaction approach," Ecological Economics, Elsevier, vol. 120(C), pages 1-12.
    6. repec:bla:kyklos:v:55:y:2002:i:4:p:473-94 is not listed on IDEAS
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    2. Alejandro Arrieta & Juan Pablo Sarmiento & Meenakshi Chabba & Weiwei Chen, 2020. "Valuing disaster risk reduction neighborhood interventions in informal settlements of Latin American and the Caribbean," PLOS ONE, Public Library of Science, vol. 15(11), pages 1-10, November.

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    More about this item

    Keywords

    economic analysis; life satisfaction; natural disasters; Philippines; valuation; well-being;
    All these keywords.

    JEL classification:

    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
    • D69 - Microeconomics - - Welfare Economics - - - Other
    • D90 - Microeconomics - - Micro-Based Behavioral Economics - - - General
    • H40 - Public Economics - - Publicly Provided Goods - - - General
    • Q51 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Valuation of Environmental Effects

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