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

Mauricio Sarrias and Benjamin Jara
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Benjamin Jara: Universidad Católica del Norte

Journal of Happiness Studies, 2020, vol. 21, issue 3, No 5, 843-875

Abstract: 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.

Keywords: Mental health; Subjective well-being; Life satisfaction approach; Economic valuation; Natural disasters; Monetary compensation; PTSD (search for similar items in EconPapers)
Date: 2020
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DOI: 10.1007/s10902-019-00112-y

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