The Life Satisfaction Approach to Environmental Valuation

In many countries environmental policies and regulations are implemented to improveenvironmental quality and thus individuals’ well-being. However, how do individuals valuethe environment? In this paper, we review the Life Satisfaction Approach (LSA) representinga new non-market valuation technique. The LSA builds on the recent development ofsubjective well-being research in economics and takes measures of reported life satisfactionas an empirical approximation to individual welfare. Micro-econometric life satisfactionfunctions are estimated taking into account environmental conditions along with income andother covariates. The estimated coefficients for the environmental good and income can thenbe used to calculate the implicit willingness-to-pay for the environmental good.