Structural Equation Modelling and the Causal Effect of Permanent Income on Life Satisfaction: The Case of Air Pollution Valuation in Switzerland

30 Pages Posted: 9 Jun 2016

See all articles by Eleftherios Giovanis

Eleftherios Giovanis

Manchester Metropolitan University-Business School, Department of Economics, Policy and International Business; Aydin Adnan Menderes University, Nazilli Faculty of Economics and Administrative Sciences

Oznur Ozdamar

Aydın Adnan Menderes University

Date Written: July 2016

Abstract

This study examines the relationship between air quality and life satisfaction. Moreover, a panel structural equation modelling (SEM) is applied in order to capture the causal effect of permanent income on life satisfaction. Swiss Household Panel (SHP) Survey (2000–2013), which is a detailed micro level survey, is used for the analysis controlling for personal and household characteristics. Five air pollutants are examined in the entire analysis; ozone (O), particulate matter (PM), carbon monoxide (CO), sulphur dioxide (SO) and nitrogen dioxide (NO). Furthermore, the marginal willingness‐to‐pay (MWTP) values for reducing air pollution are calculated. For the robustness checks, the SEM estimates are compared with those derived by the adapted Probit Fixed Effects (FE) model. Overall results show that MWTP values are higher for SO followed by O and NO, while the lowest values are reported for CO and PM Moreover, it is found that the permanent income has a positive significant effect on life satisfaction. However, considering the SEM estimations, findings for the income effects on life satisfaction are stronger than those found from the adapted Probit FE estimates that lead to lower MWTP values.

Keywords: Air Quality, Causal Inference, Environmental Valuation, Life Satisfaction, Structural Equation Modelling

Suggested Citation

Giovanis, Eleftherios and Ozdamar, Oznur, Structural Equation Modelling and the Causal Effect of Permanent Income on Life Satisfaction: The Case of Air Pollution Valuation in Switzerland (July 2016). Journal of Economic Surveys, Vol. 30, Issue 3, pp. 430-459, 2016. Available at SSRN: https://ssrn.com/abstract=2791825 or http://dx.doi.org/10.1111/joes.12163

Eleftherios Giovanis (Contact Author)

Manchester Metropolitan University-Business School, Department of Economics, Policy and International Business ( email )

Business School
All Saints Campus
Manchester, M15 6BH
United Kingdom

Aydin Adnan Menderes University, Nazilli Faculty of Economics and Administrative Sciences ( email )

Nazilli IIBF
Sumer Kampusu
Aydin, Nazilli 09800
Turkey

Oznur Ozdamar

Aydın Adnan Menderes University ( email )

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