Valuing Public Goods: The Life Satisfaction Approach

IEW Working Paper No. 184

35 Pages Posted: 3 Jun 2004

See all articles by Alois Stutzer

Alois Stutzer

University of Basel; IZA Institute of Labor Economics

Simon Luechinger

University of Lucerne

Bruno S. Frey

CREMA; University of Basel

Multiple version iconThere are 2 versions of this paper

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

Stutzer, Alois and Luechinger, Simon and Frey, Bruno S., Valuing Public Goods: The Life Satisfaction Approach (March 2004). IEW Working Paper No. 184, Available at SSRN: or

Alois Stutzer (Contact Author)

University of Basel ( email )

Faculty of Business and Economics
Peter Merian-Weg 6
4002 Basel
0041 61 207 3361 (Phone)


IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072

Simon Luechinger

University of Lucerne ( email )

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P.O. Box 4466
Lucerne, 6002

Bruno S. Frey

CREMA ( email )

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

University of Basel ( email )

Peter Merian-Weg 6
Basel, 4002

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