Journal of Happiness Studies

, Volume 18, Issue 5, pp 1275–1303 | Cite as

Monetary Valuations of Life Conditions in a Consistent Framework: The Life Satisfaction Approach

  • Tetsuya TsurumiEmail author
  • Shunsuke Managi
Research Paper


The life satisfaction approach (LSA) enables researchers to attach monetary values to nonmarket circumstances that affect people’s life satisfaction. Previous studies employ LSA to examine how the environment, health, and social capital, etc. affect life satisfaction. This study focuses on the OECD Better Life Index and intends to evaluate more comprehensive socioeconomic characteristics. Considering comprehensive factors about life enables us to avoid biased estimation. This study also considers more consistent estimation methods. Previous studies tend to attach monetary valuations in different settings. Thus, it is difficult to compare the effects of different socioeconomic circumstances. This study employs LSA to estimate the happiness functions of Japanese survey respondents by incorporating extensive socioeconomic characteristics as explanatory variables. Controlling for multiple factors affecting subjective wellbeing, we more accurately attach monetary values to each factor within a consistent analytical framework. By doing so, we assess factors’ relative comparable influence on subjective wellbeing. We adopt three estimation procedures to check robustness against model specifications. Results indicate that respondents value small changes in their socioeconomic circumstances more highly than other factors. Especially, circumstances surrounding quality of life carry higher equivalent monetary valuations than material living standards.


Happiness Life satisfaction approach Better Life Index Stochastic frontier Data envelopment analysis 



We appreciate Hideyuki Mizobuchi of Ryukoku University for computing results applying DEA. The authors thank Stephanie Rossouw (co-editor), and the anonymous referees for helpful comments.


This research was partially funded by a Grant-in-Aid for Specially Promoted Research (26000001) from the Ministry of Education, Culture, Sports, Science and Technology (MEXT), Japan, and Ministry of Environment, Japan. The results and conclusions of this paper do not necessarily reflect the views of the funding agency.


  1. Aigner, D., Lovell, C. A. K., & Schmidt, P. (1977). Formulation and estimation of stochastic frontier production function models. Journal of Econometrics, 6, 21–37.CrossRefGoogle Scholar
  2. Ambrey, C. L., & Fleming, C. M. (2011). Valuing scenic amenity using life satisfaction data. Ecological Economics, 72, 106–115.CrossRefGoogle Scholar
  3. Ambrey, C., & Fleming, C. (2013). Public greenspace and life satisfaction in Urban Australia. Urban Studies, 51(6), 1290–1321.CrossRefGoogle Scholar
  4. Ambrey, C. L., Fleming, C. M., & Chan, A. Y.-C. (2014). Estimating the cost of air pollution in South East Queensland: An application of the life satisfaction non-market valuation approach. Ecological Economics, 97, 172–181.CrossRefGoogle Scholar
  5. Ambrey, C. L., Fleming, C. M., & Manning, M. (2013). Perception or reality, What matters most when it comes to crime in your neighbourhood? Social Indicators Research, 119(2), 877–896.CrossRefGoogle Scholar
  6. Bjørnskov, C. (2003). The happy few: Cross-country evidence on social capital and life satisfaction. Kyklos, 56(1), 3–16.CrossRefGoogle Scholar
  7. Blanchflower, D. G., & Oswald, A. J. (2004). Well-being over time in Britain and the USA. Journal of Public Economics, 88(7-8), 1359–1386.CrossRefGoogle Scholar
  8. Booth, A. L., & Ours, J. C. Van. (2008). Job satisfaction and family happiness: The part-time work puzzle. The Economic Journal, 118(2003), F77–F99.CrossRefGoogle Scholar
  9. Charnes, A., Cooper, W. W., & Rhodes, E. (1978). Measuring the efficiency of decision making units. European Journal of Operational Research, 2(6), 429–444.CrossRefGoogle Scholar
  10. Clark, A. E., & Oswald, A. J. (1994). Unhappiness and unemployment. The Economic Journal, 104(424), 648–659.CrossRefGoogle Scholar
  11. Cohen, M. A. (2008). The Effect of Crime on Life Satisfaction. The Journal of Legal Studies, 37(52), S325–S353.CrossRefGoogle Scholar
  12. Cooper, W. W., Seiford, L. M., & Zhu, J. (2011). Handbook on Data Envelopment Analysis, 2 edn. In W. W. Cooper, L. M. Seiford, J. Zhu (eds.), Boston, MA: Springer.Google Scholar
  13. Costa, D. L., & Kahn, M. E. (2003). Understanding the American decline in social capital, 1952–1998. Kyklos, 56(1), 17–46.CrossRefGoogle Scholar
  14. Cuñado, J., & de Gracia, F. P. (2012). Does education affect happiness? Evidence for Spain. Social Indicators Research, 108(1), 185–196.CrossRefGoogle Scholar
  15. Das, D. (2008). Urban quality of life: A case study of Guwahati. Social Indicators Research, 88(2), 297–310.CrossRefGoogle Scholar
  16. Das, M., & Soest, A. Van. (1999). A panel data model for subjective information on household income growth. Journal of Economic Behavior & Organization, 40, 409–426.CrossRefGoogle Scholar
  17. Di Tella, R., MacCulloch, R. J., & Oswald, A. J. (2001). Preferences over inflation and unemployment: Evidence from surveys of happiness. American Economic Review, 91(1), 335–341.CrossRefGoogle Scholar
  18. Dolan, P., Kavetsos, G., & Tsuchiyab, A. (2013). Sick but satisfied: The impact of life and health satisfaction on choice between health scenarios. Journal of Health Economics, 32(4), 708–714.CrossRefGoogle Scholar
  19. Dorn, D., et al. (2007). Is it culture or democracy? The impact of democracy and culture on happiness. Social Indicators Research, 82(3), 505–526.CrossRefGoogle Scholar
  20. Easterlin, R. A. (1974). Does economic growth improve the human lot? Some empirical evidence. In M. Abramovitz, P. A. David, & M. W. Reder (Eds.), Nations and households in economic growth: Essays in honor of Moses Abramovitz (pp. 89–125). New York: Academic Press.Google Scholar
  21. Fengler, A. P. (1984). Life satisfaction of subpopulations of elderly the comparative effects of volunteerism, employment, and meal site participation. Research on Aging, 6(2), 189–212.CrossRefGoogle Scholar
  22. Ferreira, S., & Moro, M. (2010). On the use of subjective well-being data for environmental valuation. Environmental & Resource Economics, 46(3), 249–273.CrossRefGoogle Scholar
  23. Ferreira, S., et al. (2013). Life satisfaction and air quality in Europe. Ecological Economics, 88, 1–10.CrossRefGoogle Scholar
  24. Ferrer-i-Carbonell, A., & Frijters, P. (2004). How important is methodology for the estimates of the determinants of happiness? The Economic Journal, 114(497), 641–659.CrossRefGoogle Scholar
  25. Ferrer-i-Carbonell, A., & van Praag, B. M. S. (2002). The subjective costs of health losses due to chronic diseases. An alternative model for monetary appraisal. Health Economics, 11(8), 709–722.CrossRefGoogle Scholar
  26. Frey, B. S. (2008). Happiness: A revolution in economics. Cambridge, Massachusetts: The MIT Press.CrossRefGoogle Scholar
  27. Frey, B. S., Luechinger, S., & Stutzer, A. (2010). The life satisfaction approach to environmental valuation. Annual Review of Resource Economics, 2(1), 139–160.CrossRefGoogle Scholar
  28. Frey, B. S., & Stutzer, A. (2000). Happiness economy and institutions. The Economic Journal, 110(466), 918–938.CrossRefGoogle Scholar
  29. Frey, B. S., & Stutzer, A. (2002). Happiness and economics. Princeton, NJ: Princeton University Press.Google Scholar
  30. Havighurst, R. J., Neugarten, B. L., & Tobin, S. S. (1968). Disengagement and Patterns of Aging. In B. L. Neugarten (Ed.), Middle age and aging: A reader in social psychology (pp. 161–172). Chicago: University of Chicago Press.Google Scholar
  31. Helliwell, J. F. (2003). How’s life? Combining individual and national variables to explain subjective well-being. Economic Modelling, 20(2), 331–360.CrossRefGoogle Scholar
  32. Helliwell, J. F., & Huang, H. (2008). How’s your government? International evidence linking good government and well-being. British Journal of Political Science, 38(04), 595–619.CrossRefGoogle Scholar
  33. Helliwell, J. F., Layard, R., & Sachs, J. D. (Eds.). (2012). World happiness report, New York. NY: The Earth Institute, Columbia University.Google Scholar
  34. Helliwell, J. F., Layard, R., & Sachs, J. D. (Eds.). (2013). World happiness report 2013. New York, NY: Sustainable Development Solutions Network.Google Scholar
  35. Helliwell, J. F., & Putnam, R. D. (2004). The social context of well-being. Philosophical Transactions of the Royal Society of London. Series B, Biological sciences, 359(1449), 1435–1446.CrossRefGoogle Scholar
  36. Ibem, E. O., & Amole, D. (2013). Subjective life satisfaction in public housing in Urban areas of Ogun State, Nigeria. Cities, 35, 51–61.CrossRefGoogle Scholar
  37. Inglehart, R., & Klingemann, H.-D. (2000). Cenes, Culture, Demography, and Happiness. In E. Diener & E. M. Suh (Eds.), Culture and subjective well-being (pp. 165–184). Cambridge, Massachusetts: MIT Press.Google Scholar
  38. Kahneman, D., & Deaton, A. (2010). High income improves evaluation of life but not emotional well-being. Proceedings of the National Academy of Sciences of the United States of America, 107(38), 16489–16493.CrossRefGoogle Scholar
  39. Lee, E., & Park, N.-K. (2010). Housing satisfaction and quality of life among temporary residents in the United States. Housing and Society, 37(1), 43–67.CrossRefGoogle Scholar
  40. Lee, H., et al. (2013). Subjective well-being and the measurement of quality in healthcare. Social Science and Medicine, 99, 27–34.CrossRefGoogle Scholar
  41. Levinson, A. (2012). Valuing public goods using happiness data: The case of air quality. Journal of Public Economics, 96(9-10), 869–880.CrossRefGoogle Scholar
  42. Luechinger, S. (2009). Valuing air quality using the life satisfaction approach. The Economic Journal, 119(536), 482–515.CrossRefGoogle Scholar
  43. Luechinger, S. (2010). Life satisfaction and transboundary air pollution. Economics Letters, 107(1), 4–6.CrossRefGoogle Scholar
  44. MacKerron, G., & Mourato, S. (2009). Life satisfaction and air quality in London. Ecological Economics, 68(5), 1441–1453.CrossRefGoogle Scholar
  45. MacKerron, G., & Mourato, S. (2013). Happiness is greater in natural environments. Global Environmental Change, 23(5), 992–1000.CrossRefGoogle Scholar
  46. Maddison, D., & Rehdanz, K. (2011). The impact of climate on life satisfaction. Ecological Economics, 70(12), 2437–2445.CrossRefGoogle Scholar
  47. Maddox, G. L. (1968). Persistence of life style among the elderly: A longitudinal study of patterns of social activity in relation to life satisfaction. In B. L. Neugarten (Ed.), Middle age and aging: A reader in social psychology (pp. 181–183). Chicago: University of Chicago Press.Google Scholar
  48. Meier, S., & Stutzer, A. (2008). Is volunteering rewarding in itself? Economica, 75(297), 39–59.Google Scholar
  49. Menz, T. (2011). Do people habituate to air pollution? Evidence from international life satisfaction data. Ecological Economics, 71, 211–219.CrossRefGoogle Scholar
  50. Menz, T., & Welsch, H. (2010). Population aging and environmental preferences in OECD countries: The case of air pollution. Ecological Economics, 69(12), 2582–2589.CrossRefGoogle Scholar
  51. Miilunpalo, S., et al. (1997). Self-Rated health status as a health measure: The predictive value of self-reported health status on the use of physician services and on mortality in the working-age population. Journal of Clinical Epidemiology, 50(5), 517–528.CrossRefGoogle Scholar
  52. Mizobuchi, H. (2014). Socioeconomic factors and sensitivity of happiness. Discussion Paper Series, Faculty of Economics, Ryukoku University No. 14-01.Google Scholar
  53. Organization for Economic Cooperation and Development. (2011). How’s life?. Paris: OECD Publishing.Google Scholar
  54. Oswald, F., et al. (2003). Housing and life satisfaction of older adults in two rural regions in Germany. Research on Aging, 25(2), 122–143.CrossRefGoogle Scholar
  55. Paxton, P. (1999). Is social capital declining in the United States? A multiple indicator assessment. American Journal of Sociology, 105(1), 88–127.CrossRefGoogle Scholar
  56. Peck, C., & Stewart, K. K. (1985). Satisfaction with housing and quality of life. Family and Consumer Sciences Research Journal, 13, 363–372.Google Scholar
  57. Plagnol, A. C. (2011). Financial satisfaction over the life course: The influence of assets and liabilities. Journal of Economic Psychology, 32(1), 45–64.CrossRefGoogle Scholar
  58. Pouwels, B., Siegers, J., & Vlasblom, J. D. (2008). Income, working hours, and happiness. Economics Letters, 99(1), 72–74.CrossRefGoogle Scholar
  59. Powdthavee, N. (2005). Unhappiness and crime: Evidence from South Africa. Economica, 72(287), 531–547.CrossRefGoogle Scholar
  60. Powdthavee, N. (2008). Putting a price tag on friends, relatives, and neighbours: Using surveys of life satisfaction to value social relationships. Journal of Socio-Economics, 37(4), 1459–1480.CrossRefGoogle Scholar
  61. Pugno, M. (2009). The easterlin paradox and the decline of social capital: An integrated explanation. Journal of Socio-Economics, 38(4), 590–600.CrossRefGoogle Scholar
  62. Putnam, R. D. (2000). Bowling alone: The collapse and revival of American Community. New York, NY: Simon & Schuster.CrossRefGoogle Scholar
  63. Rehdanz, K., & Maddison, D. (2008). Local environmental quality and life-satisfaction in Germany. Ecological Economics, 64(4), 787–797.CrossRefGoogle Scholar
  64. Rothstein, B. (2001). Social capital in the social democratic welfare state. Politics & Society, 29(2), 207–241.CrossRefGoogle Scholar
  65. Salinas-Jiménez, M. D. M., Artés, J., & Salinas-Jiménez, J. (2011). Education as a positional good: A life satisfaction approach. Social Indicators Research, 103(3), 409–426.CrossRefGoogle Scholar
  66. Stevenson, B., & Wolfers, J. (2008). Economic Growth and Subjective Well-Being: Reassessing the Easterlin Paradox. Brookings Papers on Economic Activity, 2008(Spring), 1–87.CrossRefGoogle Scholar
  67. Stevenson, B., & Wolfers, J. (2013). Subjective well-being and income: Is there any evidence of satiation? American Economic Review, 103(3), 598–604.CrossRefGoogle Scholar
  68. Stiglitz, J. E., Sen, A., & Fitoussi, J.-P. (2009). Report by the Commission on the Measurement of Economic Performance and Social Progress.Google Scholar
  69. Tsurumi, T., Kuramashi, K., & Managi, S. (2013). Determinants of happiness: environmental degradation and attachment to nature. In S. Managi (Ed.), The economics of boidiversity and ecosystem services (pp. 62–86). New York: Routledge.Google Scholar
  70. Van Praag, B. M. S., & Baarsma, B. E. (2005). Using happiness surveys to value intangibles: The case of airport noise. Economic Journal, 115(2000), 224–246.CrossRefGoogle Scholar
  71. Ward, R. A. (1979). The meaning of voluntary association participation to older people. Journal of Gerontology, 34(3), 438–445.CrossRefGoogle Scholar
  72. Welsch, H. (2002). Preferences over prosperity and pollution: Environmental valuation based on happiness surveys. Kyklos, 55(4), 473–494.CrossRefGoogle Scholar
  73. Westaway, M. S. (2006). A longitudinal investigation of satisfaction with personal and environmental quality of life in an informal South African housing settlement, Doornkop, Soweto. Habitat International, 30(1), 175–189.CrossRefGoogle Scholar
  74. Zebardast, E. (2009). The housing domain of quality of life and life satisfaction in the spontaneous settlements on the Tehran metropolitan fringe. Social Indicators Research, 90(2), 307–324.CrossRefGoogle Scholar

Copyright information

© Springer Science+Business Media Dordrecht 2016

Authors and Affiliations

  1. 1.Nanzan UniversitySetoJapan
  2. 2.Urban Research Center, Departments of Civil Engineering, School of EngineeringKyushu UniversityFukuokaJapan
  3. 3.QUT Business SchoolQueensland University of TechnologyBrisbaneAustralia

Personalised recommendations