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

33 Pages Posted: 22 Feb 2019

See all articles by Cheryl Joy Fernandez

Cheryl Joy Fernandez

University of the Philippines, Visayas

David Raitzer

Asian Development Bank

Edimon Ginting

Asian Development Bank

Date Written: January 29, 2019

Abstract

Economic analysis often faces challenges in the valuation of non-market goods and services. The traditional set of non-market valuation tools for measuring Marshallian economic surplus has limitations related to potential bias in stated preferences and endogeneity of non-market amenity placement in revealed preference studies. The life satisfaction approach offers a Hicksian compensating variation-based alternative, which uses self-reported subjective well-being to calculate the marginal rate of substitution of income for non-market 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.

Keywords: economic analysis, life satisfaction, natural disasters, Philippines, valuation, well-being

JEL Classification: D61, D69, D90, H40, Q51

Suggested Citation

Fernandez, Cheryl Joy and Raitzer, David and Ginting, Edimon, Potential Use of the Life Satisfaction Approach to Value Nonmarket Goods and Services (January 29, 2019). Asian Development Bank Economics Working Paper Series No. 569 (January, 2019). Available at SSRN: https://ssrn.com/abstract=3339200 or http://dx.doi.org/10.2139/ssrn.3339200

Cheryl Joy Fernandez

University of the Philippines, Visayas ( email )

Iloilo City, 5023
Philippines

David Raitzer (Contact Author)

Asian Development Bank ( email )

6 ADB Avenue, Mandaluyong City 1550
Metro Manila
Philippines

Edimon Ginting

Asian Development Bank ( email )

6 ADB Avenue, Mandaluyong City 1550
Metro Manila
Philippines

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