A step towards valuing utility the marginal and cardinal way

Dolan, Paul, Fujiwara, Daniel and Metcalfe, Robert (2011) A step towards valuing utility the marginal and cardinal way. CEP Discussion Papers (CEPDP1062). London School of Economics and Political Science. Centre for Economic Performance, London, UK.

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Abstract

Income has a direct impact on our utility as well as an indirect impact through the goods, services and life events it allows us to purchase. The indirect effect of income is not properly accounted for in existing research that uses measures of cardinal utility for economic analysis. We propose a new approach for appropriately attributing the full effects of income on utility and we show the implications of our approach using a longitudinal dataset that contains reports of subjective wellbeing (SWB). We show that income has a much greater effect on SWB when indirect effects are considered. These results have important implications for how we value the marginal benefits of non-market goods and we explore some of these issues in the paper

Item Type:	Monograph (Discussion Paper)
Official URL:	https://cep.lse.ac.uk/_new/publications/discussion...
Additional Information:	© 2011 The Author(s)
Divisions:	Psychological and Behavioural Science
Subjects:	H Social Sciences > HC Economic History and Conditions
JEL classification:	A - General Economics and Teaching > A1 - General Economics > A10 - General D - Microeconomics > D6 - Welfare Economics D - Microeconomics > D6 - Welfare Economics > D61 - Allocative Efficiency; Cost-Benefit Analysis H - Public Economics > H4 - Publicly Provided Goods > H41 - Public Goods I - Health, Education, and Welfare > I3 - Welfare and Poverty > I31 - General Welfare; Basic Needs; Living Standards; Quality of Life; Happiness
Date Deposited:	05 Mar 2024 13:30
Last Modified:	05 Mar 2024 13:30
URI:	http://eprints.lse.ac.uk/id/eprint/121714

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