Abstract of PhD Thesis

Essays on the Measurement of Sustainability and Well-being

Mirko Moro, University College Dublin (2008)

This thesis focuses on the economic measurement of sustainability and well-being. Measuring implies being capable of comparing different states to judge, within a given framework, which one is better and if something needs to be done to improve current policies. The thesis is developed in two parts: a macro-level analysis on sustainability and a micro-level analysis on current well-being. At macro level, sustainable development is defined as a path characterised by non-declining well-being over time, which coincides with non-declining comprehensive wealth, inclusive of natural and human capital. A measure of ‘genuine’ investment (which includes some of the negative externalities arising from air pollution) is estimated and used to assess the sustainability of a developed country such as Ireland over the period 1995-2005. In sharp contrast with previous literature and with existent World Bank estimates, the final results show that Ireland may have experienced sustainability problems in the past. The erosion of natural capital was recently compensated by growing investment in man-made and human capital, signifying that Ireland is currently weakly sustainable. However, the inclusion of externalities typically not taken into consideration when building macroeconomic indicators of sustainability may lead to completely different conclusions regarding the sustainability of developed countries. Nevertheless, assessing and estimating the impact of environmental factors on well-being is difficult and costly. The second part of the thesis addresses this issue. First, self-reported measures of well-being (SWB) are linked to GIS spatially-referenced environmental attributes to assess which local-specific environmental goods (or bads) are important determinants of well-being and should be included in sustainability indicators. Second, comprehensive theoretical and methodological frameworks are built to show how SWB data could be used to compute the willingness to pay (or to accept) for environmental changes and to built quality of life indices. It is shown that currently empirical estimates of monetary values with the SWB approach suffer from systematic upward bias. This caveat does not apply when building quality of life indices and, in general, when assessing the effect of local environmental goods on individual’s well-being. This is validated by the last Chapter which confirms that local climate and water pollution affect individual’s well-being directly, even after controlling for reporting biases, suggesting that policy interventions aiming at improving environmental quality are unambiguously well-being.