Valuing Public Goods: The Life Satisfaction Approach
IEW Working Paper No. 184
35 Pages Posted: 3 Jun 2004
Date Written: March 2004
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: Suggested Citation