Valuing flood disasters using the life satisfaction approach

This paper argues that life satisfaction data can be used to value natural disasters. We discuss the strengths of this approach, compare it to traditional methods and apply it to estimate and monetize utility losses caused by floods in 16 European countries between 1973 and 1998. Using combined cros...

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Bibliographic Details
Published in:Journal of public economics 2009-04, Vol.93 (3), p.620-633
Main Authors: Luechinger, Simon, Raschky, Paul A.
Format: Article
Language:English
Subjects:
Cost-benefit analysis
Disaster relief
Flood
Floods
Life satisfaction
Life satisfaction approach
Life satisfaction approach Non-market valuation Cost-benefit analysis Subjective well-being Risk-prevention Natural hazards Flood
Natural disasters
Natural hazards
Non-market valuation
Risk-prevention
Subjective well-being
Well-being
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Summary:This paper argues that life satisfaction data can be used to value natural disasters. We discuss the strengths of this approach, compare it to traditional methods and apply it to estimate and monetize utility losses caused by floods in 16 European countries between 1973 and 1998. Using combined cross-section and time-series data, we find a negative impact of floods on life satisfaction that is sizeable, robust and significant. The estimates are comparable to price discounts found in housing markets. In an exploratory analysis, we find that risk transfer mechanisms such as mandatory insurance have large mitigating effects.
ISSN:0047-2727
1879-2316
DOI:10.1016/j.jpubeco.2008.10.003