Valuing Public Goods: The Life Satisfaction Approach

35 Pages Posted: 13 Apr 2004

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

Multiple version iconThere are 2 versions of this paper

Date Written: March 2004

Abstract

This paper discusses a novel approach to elicit people's preferences for public goods, namely the life satisfaction approach. Reported subjective well-being data are used to directly evaluate utility consequences of public goods. The strengths of this approach are compared to traditional approaches and identification issues are addressed. Moreover, it is applied to estimate utility losses caused by terrorist activities in France, the UK and the Republic of Ireland. Terrorism in these countries depresses life satisfaction in a sizeable and robust way. However, the calculation of the trade-off between terrorism and income requires improved measurement of the marginal utility of income.

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

JEL Classification: D61, D74, H41, H56, I31

Suggested Citation

Frey, Bruno S. and Luechinger, Simon and Stutzer, Alois, Valuing Public Goods: The Life Satisfaction Approach (March 2004). CESifo Working Paper Series No. 1158. Available at SSRN: https://ssrn.com/abstract=528182

Bruno S. Frey (Contact Author)

CREMA ( email )

Südstrasse 11
Zurich, CH 8008
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+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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