The causal effect of income on life satisfaction and the implications for valuing non-market goods

Christopher L. Ambrey and Christopher Fleming ()

Economics Letters, 2014, vol. 123, issue 2, 131-134

Abstract: Employing the life satisfaction approach to value physical health, this paper illustrates the use of a subset of windfall income (restricted windfall income) as a substitute for the more conventional household income monetary measure. Results provide no evidence against the exogeneity of restricted windfall income and indicate that the causal effect of income on life satisfaction is substantially higher (and willingness-to-pay estimates substantially lower) when restricted windfall income is used. Further research should be devoted to looking into the presence and size of measurement errors in restricted windfall income. If this bias is large, then the quest for valid and strong instruments will continue.

Keywords: Happiness; Health; Household, Income and Labour Dynamics in Australia (HILDA) survey; Income; Instrumental variable; Life satisfaction (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (14)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:123:y:2014:i:2:p:131-134

DOI: 10.1016/j.econlet.2014.01.031

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