The Life Satisfaction Approach to Environmental Valuation

31 Pages Posted: 20 Oct 2009

See all articles by Bruno S. Frey

Bruno S. Frey

CREMA; University of Basel

Simon Luechinger

University of Lucerne

Alois Stutzer

University of Basel - Faculty of Business and Economics; IZA Institute of Labor Economics

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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.

Keywords: life satisfaction approach, subjective well-being, non-market valuation, cost-benefit analysis, air pollution

JEL Classification: Q51, I31, D61, Q53

Suggested Citation

Frey, Bruno S. and Luechinger, Simon and Stutzer, Alois, The Life Satisfaction Approach to Environmental Valuation. IZA Discussion Paper No. 4478. Available at SSRN: https://ssrn.com/abstract=1490480

Bruno S. Frey (Contact Author)

CREMA ( email )

Südstrasse 11
Zurich, CH 8008
Switzerland
+41 44 380 00 78 (Phone)

University of Basel ( email )

Peter Merian-Weg 6
Basel, 4002
Switzerland

Simon Luechinger

University of Lucerne ( email )

Frohburgstrasse 3
P.O. Box 4466
Lucerne, 6002
Switzerland

Alois Stutzer

University of Basel - Faculty of Business and Economics ( email )

Peter Merian-Weg 6
4002 Basel
Switzerland
0041 61 267 3361 (Phone)
0041 61 267 3340 (Fax)

HOME PAGE: http://www.wwz.unibas.ch/stutzer/

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

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