Potential Use of the Life Satisfaction Approach to Value Nonmarket Goods and Services
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This paper explains the life satisfaction approach to economic analysis and illustrates it with an example of
flooding from Iloilo, Philippines. Recommendations are offered for application of the technique in the economic
analysis of investment projects. 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.