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Environment and Happiness: Valuation of Air Pollution in Ten European Countries

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  • Heinz Welsch

Abstract

This paper uses a set of panel data from happiness surveys, jointly with data on per capita income and pollution, to examine how self-reported well-being varies with prosperity and environmental conditions. This approach permits to show that citizens care about prosperity and the environment, and to calculate the trade-off people are willing to make between them. The paper finds that air pollution plays a statistically significant role as a predictor of intercountry and inter-temporal differences in subjective well-being. The effect of air pollution on well-being shows up as a considerable monetary valuation of improved air quality. The air quality improvements achieved in Western Europe in 1990-1997 are valued at almost $900 per capita per year in the case of nitrogen dioxide and more than $1400 per capita per year in the case of lead.

Suggested Citation

  • Heinz Welsch, 2003. "Environment and Happiness: Valuation of Air Pollution in Ten European Countries," Discussion Papers of DIW Berlin 356, DIW Berlin, German Institute for Economic Research.
    • Handle: RePEc:diw:diwwpp:dp356
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    File URL: https://www.diw.de/documents/publikationen/73/diw_01.c.40635.de/dp356.pdf
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    References listed on IDEAS

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    1. Daniel Kahneman & Peter P. Wakker & Rakesh Sarin, 1997. "Back to Bentham? Explorations of Experienced Utility," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 112(2), pages 375-406.
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    3. Clark, Andrew E & Oswald, Andrew J, 1994. "Unhappiness and Unemployment," Economic Journal, Royal Economic Society, vol. 104(424), pages 648-659, May.
    4. Won Kim, Chong & Phipps, Tim T. & Anselin, Luc, 2003. "Measuring the benefits of air quality improvement: a spatial hedonic approach," Journal of Environmental Economics and Management, Elsevier, vol. 45(1), pages 24-39, January.
    5. Heinz Welsch, 2002. "Preferences over Prosperity and Pollution: Environmental Valuation based on Happiness Surveys," Kyklos, Wiley Blackwell, vol. 55(4), pages 473-494, November.
    6. Morawetz, David, 1977. "Income Distribution and Self-Rated Happiness: Some Empirical Evidence," Economic Journal, Royal Economic Society, vol. 87(347), pages 511-522, September.
    7. repec:bla:kyklos:v:55:y:2002:i:4:p:473-94 is not listed on IDEAS
    8. Ng, Yew-Kwang, 1997. "A Case for Happiness, Cardinalism, and Interpersonal Comparability," Economic Journal, Royal Economic Society, vol. 107(445), pages 1848-1858, November.
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    Cited by:

    1. MacKerron, George & Mourato, Susana, 2009. "Life satisfaction and air quality in London," Ecological Economics, Elsevier, vol. 68(5), pages 1441-1453, March.

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    More about this item

    Keywords

    pollution; environmental valuation; subjective well-being; marginal rate of substitution;
    All these keywords.

    JEL classification:

    • Q2 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation

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    This paper has been announced in the following NEP Reports:

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