(Non-market) Valuation methods – Life satisfaction (Wellbeing valuation)

[SOURCE: Glanz A and Knapp M (2017) Understanding substantive and theoretical issues in long-term care. Glossary of key terms. From: Social Protection Investment in Long-Term Care Project, HORIZON 2020 - Grant Agreement No 649565. European Union. (The resource is accessible here)]

Wellbeing valuation uses statistical analyses of large questionnaire datasets to value changes in life circumstances by calculating the increase in income which would be necessary for an equivalent increase in wellbeing (Trotter et al. 2014). For example, if the increase in wellbeing associated with improved mental health is equivalent to the increase in wellbeing associated with a €2,000 increase in income, then it can be inferred that the value of improved mental health is €2,000 per year. A combination of the wellbeing valuation and stated preference approaches can be used (called hybrid stated preference / wellbeing valuation), whereby respondents are asked to state the amount of compensation they would be willing to accept for a particular loss, in order to maintain their current level of wellbeing.

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