Following the first workshop a month ago, today I attended the second of a series of “Workshops on Well-being” at the LSE. Below are some (very) impressionistic notes.
Presentation by Paul Dolan and Robert Metcalfe: Valuing non-market Goods: Preference based and experience based methods
How do Value non-market goods?
- Preferences
- revealed (observed market behaviour)
- stated (contingent hypothetical market)
- Experiences: subjective well-being
- Traditionally (implicitly) assume all of these are equivalent
urban renewal in swansea (from 2001)
- 2 areas: hafod and landore
- hafod has had renewal (500/950 homes)
- landore (675) has not
- compare the two (omitting those who have not yet had renewal and in-movers)
Improvements:
- front boundary walls
- street lighting
- etc
- landore: house cost 95k, income 16k
- hafod
Estimate revealed preferences using land-registry data and dummy for renewal.
WTP: card they fill in saying what they are willing to pay for various improvements (per month for 3 years).
“Thinking about your life and personal circumstances, how satisfied are you with your life as a whole?”
364 out of 1625 (22.4%) response rate (low but representative)
- slightly biased to renewal area
Revealed prefs: no effect on prices of renewal (and apparently this had also been found in a much larger
WTP: £750 over 3 years (£250 a year)
6.5% increase in life satisfaction (7.1 to 7.7 on a 10 point scale)
- controlling for marital status, age, gender, income etc
- approx 19k in monetary terms
- but problems of endogeneity of income
- instrument using partner in employment and rented accommodation well-being hit now is £6350
- cost of renewal was ~14k
2nd experiment: renewal in Port Talbot but not Neath
- 8k for improvements + £250 for home safety per household
- WTP: £500 (over 3 years)
- SWB: 12.5k
- but 2.5k for repair and 10k for safety!
- income instrumented by WTP
What explains the discrepancy?
- revealed preference may be wrong because of unobserved effects (e.g. improvements in Hafod).
- WTP: evidence that per month/year figures would just go on forever (even though told just for 3 years).
- SWB Income Compensation: might be discounted PV of long-term benefits.
- WTP accumulate over 12-20 years (average time people are in the house) or discounted SWB IC over 25 years results in WTP value = SWB IC value.
