Mónica Hernández-Alava, Allan Wailoo and I have just released a new working paper. You can access it through RePEc here. The paper builds on previous work (mainly by Paul Dolan) looking at subjective well-being as a potential means of valuing health benefits. Our study, however, identifies a number of limitations of these existing studies and offers a solution to some of their problems. Furthermore, our findings contradict some of those reported in previous studies.

Here’s the abstract:

Subjective well-being has been proposed as an alternative to preference based values of health benefit for use in economic evaluation. We develop a latent factor model of health and well-being in order to compare reported satisfaction with life, satisfaction with health and SF-6D responses. This approach provides a coherent, integrated statistical framework for assessing differences between these outcomes on the same scale. Using panel data from the British Household Panel Survey we find that SF-6D and satisfaction with health are influenced to a similar degree by changes in latent health and satisfaction with life is less responsive. For the average individual, there are no substantial differences in the relative impacts of physical versus mental health conditions between the three measures. These findings suggest that the differences between experienced and hypothetical values of health and life satisfaction may not lead to substantial differences in the assessment of value from health technologies.

This paper has been a long-time coming, and is barely recognisable from its earlier incarnations. It started out as my MSc dissertation, which was completed in 2010. Since then a slightly improved version appeared at HESG in Exeter earlier this year, after which the study got something of an econometric makeover. Please do have a read of the paper if you’re interested in this area of research and we’d welcome any comments you might have.