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

Author

Listed:
  • Cheryl Joy Fernandez

    (Asian Development Bank)

  • David Raitzer

    (Asian Development Bank)

  • Edimon Ginting

    (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

  • Cheryl Joy Fernandez & David Raitzer & Edimon Ginting, 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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    Cited by:

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    3. 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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    Keywords

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    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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