The causal effect of income on life satisfaction and the implications for valuing non-market goods |
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Authors: | Christopher L Ambrey Christopher M Fleming |
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Institution: | Social and Economic Research Program (SERP), Griffith University, 170 Kessels Road, Nathan, QLD 4111, Australia |
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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. |
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Keywords: | Happiness Health Household Income and Labour Dynamics in Australia (HILDA) survey Income Instrumental variable Life satisfaction |
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