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How Much Should We Pay for Mental Health Deterioration? The Subjective Monetary Value of Mental Health After the 27F Chilean Earthquake

Author

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  • Mauricio Sarrias

    (Universidad Católica del Norte)

  • Benjamin Jara

    (Universidad Católica del Norte)

Abstract

In this article we use the life satisfaction approach to assess the non-pecuniary costs of Mental health impacts after the 2010 Chile earthquake. By linking both subjective well-being valuation literature with studies that describe psychological impacts after natural disasters, we are able to quantify how big a compensation should be to leave individuals as well as they were before the event. Our results suggest that people who experience stress should be compensated by approximately 80–90% of the average monthly income if the shock was strong enough to cause significant damages. These estimates are robust to different empirical specifications, endogeneity, shock intensity measures, and mental health definitions. We estimate that the total costs of mental health deterioration are about 7% of the total reported damages, a significant amount that policymakers should not ignore in post-earthquake reconstruction stages.

Suggested Citation

  • Mauricio Sarrias & Benjamin Jara, 2020. "How Much Should We Pay for Mental Health Deterioration? The Subjective Monetary Value of Mental Health After the 27F Chilean Earthquake," Journal of Happiness Studies, Springer, vol. 21(3), pages 843-875, March.
    • Handle: RePEc:spr:jhappi:v:21:y:2020:i:3:d:10.1007_s10902-019-00112-y
    DOI: 10.1007/s10902-019-00112-y
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    4. De, Prabal K. & Thamarapani, Dhanushka, 2022. "Impacts of negative shocks on wellbeing and aspirations – Evidence from an earthquake," World Development, Elsevier, vol. 154(C).

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