Isolation and Subjective Welfare

54 Pages Posted: 27 Mar 2007

See all articles by Marcel Fafchamps

Marcel Fafchamps

Stanford University - Freeman Spogli Institute for International Studies

Forhad Shilpi

World Bank - Development Research Group (DECRG)

Date Written: December 2006

Abstract

Using detailed geographical and household survey data from Nepal, this article investigates the relationship between isolation and subjective welfare. This is achieved by examining how distance to markets and proximity to large urban centers affect responses to questions about income and consumption adequacy. Results show that isolation significantly reduce subjective assessments of income and consumption adequacy, even after controlling for consumption expenditures and other factors. Part of this effect can be attributed to lower access to public goods and to a reduction in the variety of consumption items. Equivalent variation estimates suggest that the subjective cost of isolation is large but also that the gain from reduced isolation is largest for households already close to markets.

Keywords: Geographical isolation, consumption adequacy, subjective well-being

JEL Classification: D60, I31, R20

Suggested Citation

Fafchamps, Marcel and Shilpi, Forhad, Isolation and Subjective Welfare (December 2006). CEPR Discussion Paper No. 6001. Available at SSRN: https://ssrn.com/abstract=976747

Marcel Fafchamps (Contact Author)

Stanford University - Freeman Spogli Institute for International Studies ( email )

Stanford, CA 94305
United States

Forhad Shilpi

World Bank - Development Research Group (DECRG) ( email )

1818 H. Street, N.W.
MSN3-311
Washington, DC 20433
United States
202-458-7476 (Phone)
202-522-1151 (Fax)

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