Journal Article

Local environmental quality and life-satisfaction in Germany

Hitherto the task of valuing differences in environmental quality arising from air pollution

and noise nuisance has been carried out mainly by using the hedonic price technique. This

paper proposes a different approach to derive information on individual preferences for

local environmental quality. It analyses data drawn from the German socio-economic panel

in an attempt to explain differences in self-reported levels of well-being in terms of

environmental quality. Mindful of existing research a large number of other explanatory

variables are included to control for socio-demographic differences, economic

circumstances as well as neighbourhood characteristics. Differences in local air quality

and noise levels are measured by how much an individual feels affected by air pollution or

noise exposure in their residential area. The evidence suggests that even when controlling

for a range of other factors higher local air pollution and noise levels significantly diminish

subjective well-being. But interestingly differences in perceived air and noise pollution are

not capitalised into differences in house prices.


David Maddison


Publication Date
JEL Classification
R19, Q53, Q58