Working Paper

Species diversity and human well-being: A spatial econometric approach

Economic valuation of biodiversity is generally carried out by applying revealed or stated preference approaches to determine people’s willingness to pay for small changes in management options. Studies on species preservation investigating passive or nonuse values typically rely on stated preference methods such as the contingent valuation approach and often focus on single animal species. The total value of species preservation can only be derived by aggregating the various values. This paper proposes a different approach by investigating country level data on life-satisfaction attempting to explain differences in subjective well-being by reference to amongst other things species diversity. While most recent papers have concentrated on finding determinants of life-satisfaction other than income, little attention has been drawn to spatial interdependencies. Most researchers investigating the determinants of life-satisfaction implicitly assume that subjective well-being is unaffected by events in neighbouring locations. The existence of spatial relationships in the data has implications for the econometric techniques typically employed including misleading inference testing procedures, bias and inconsistency depending on the precise form of the spatial relationship. We extend our analysis by a spatial econometric approach investigating whether and to what extend spatial relationships exist. Spatially weighted variables are shown to be a highly significant determinant of life-satisfaction. As nature does not respect man-made borders, neither does peoples happiness. Furthermore, even when controlling for a range of other factors we find a significant relationship with species diversity; the higher a countries number of bird or mammal species or the lower the percentage of bird species threatened the more satisfied the people are. Overall and from a human perspective, bird species seem to be a better indicator for biodiversity.