Potential Use of the Life Satisfaction Approach to Value Nonmarket Goods and Services | Asian Development Bank

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

Publication | January 2019
Potential Use of the Life Satisfaction Approach to Value Nonmarket Goods and Services

This paper explains the life satisfaction approach to economic analysis and illustrates it with an example of flooding in the Philippines.

The approach estimates Hicksian compensating variation using self-reported subjective well-being to calculate the marginal rate of substitution of income for nonmarket amenities or services. The paper recommends how to use the technique in the economic analysis of investment projects.

Contents 

  • Introduction
  • The Economics of the Life Satisfaction Approach
  • Metropolitan Iloilo Case Study
  • Discussion
  • Conclusion
  • Appendix: Common Determinants of Individual Life Satisfaction