Concerns for environmental quality and its impact on people's welfare are fundamental arguments for the adoption of environmental legislation in most countries. In this paper, we analyse the relationship between air quality and subjective well-being in Europe. We use a unique dataset that merges three waves of the European Social Survey with a new dataset on environmental quality including SO 2 concentrations and climate in Europe at the regional level. We find a robust negative impact of SO 2 concentrations on selfreported life satisfaction.JEL classification: I31, Q51, Q53, Q54

This paper explores the potential of using subjective well-being (SWB) data to value environmental attributes. A theoretical framework compares this method, also known as the lifesatisfaction approach, with the standard hedonic pricing approach, identifying their similarities and differences. As a corollary, we show how SWB data can be used to test for the equilibrium condition implicit in the hedonic approach (i.e., equality of utility across locations). Results for Ireland show that the equilibrium condition required by the hedonic pricing approach in Irish markets does not hold. They also show that air quality, in the baseline specification, and warmer climate, across all the specifications, have a significant positive impact on SWB. Their associated monetary estimates, however, seem too large.

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The relationship between income and subjective well-being (SWB) is investigated using eight waves of the British Household Panel Survey and an estimation strategy that allows us to relax some assumptions typically made in the literature. First, we use a random effects generalized ordered probit model to investigate whether income effects are heterogeneous across SWB categories, and, second, we discretise (absolute and relative) income variables to allow for the income effects to vary across income groups. We find that higher absolute income increases SWB but up to a certain level, while low income is significantly correlated with low scores in the SWB ladder. Our results are consistent with the Easterlin Paradox that has been reported in the literature. We find that high-income groups are less likely to belong in the highest SWB level, which could be partly explained by the fact that the relative income status (rather than the absolute one) is more important in determining (the highest level of) SWB.