Valuing Urban Green Spaces Using Wellbeing Data

This is a summary from Christian Krekel, Jens Kolbe, Henry Wüstemann, “The greener, the happier? The effect of urban land use on residential well-being”, Ecological Economics, Volume 121,2016, Pages 117-127, ISSN 0921-8009, https://doi.org/10.1016/j.ecolecon.2015.11.005

In major cities, space is a scarce commodity, and urbanisation puts increasing pressure on areas that provide important ecosystem services. Acknowledging that urban areas such as parks and green spaces contribute to their climate and environmental policy objectives, the European Commission promotes their preservation by incorporating them into national and regional policies across the European Union (European Commission, 2013). Similar strategies are pursued by national governments: Germany, for example, promotes the preservation of green spaces by incorporating them into its national strategy on biodiversity protection (Federal Ministry for the Environment, Nature Conservation, Building, and Nuclear Safety, 2007).

These ongoing policy initiatives, meant to preserve green spaces, are encouraged by a growing body of studies that highlight their amenity value for residents living in their surroundings (see Bell et al. (2008) and Croucher et al. (2008) for reviews). One inherent issue in the valuation of green spaces, however, is the fact that there exist no market prices for them as public goods. Therefore, they are typically valued using stated preference approaches such as contingent valuation and discrete choice experiments in which the willingness to pay for them is elicited by asking residents directly, or revealed preference approaches such as hedonic pricing in which it is elicited indirectly by observing changes in house prices in their vicinity.

We adopt a different approach: we value green spaces using wellbeing data, trading off the impact of green spaces on life satisfaction against the impact of income, to calculate the willingness-to-pay of residents in order to have access to green spaces, as well as the life-satisfaction maximising amount of green spaces around them. To this end, we merge panel data on residential wellbeing from the German Socio-Economic Panel Study for the time period between 2000 and 2012 with cross-section data on green spaces from the European Urban Atlas for the year 2006. Our setting is the universe of major German cities with inhabitants greater than 100,000, and our empirical strategy exploits variation within residents who move between cities while controlling for a wide range of observable characteristics. As we can show that most of these residents are moving primarily for reasons that are not related to their surroundings, our empirical strategy brings us closer to identifying causal effects than most studies in the related literature.

We find that the coverage of green spaces in a one kilometre radius around households has a significant, positive effect on the life satisfaction of household members. The effect size at the individual level is small: a one hectare increase in green spaces (on average, there are 23 hectares of urban green in a one kilometre radius around households) raises life satisfaction by only 0.0066 points on a zero-to-ten scale. Note, however, that small effects at the individual level cast much larger effects at the community level due to population density in major cities: more than 6,000 residents would profit, on average, from a one hectare increase in green spaces around them, so that effects at the community level are rather large. Likewise, residents who are older (and thus presumably less mobile) profit three times as much from green spaces around them than does the average resident. We find that residents are, on average, willing to pay 276 Euro of annual net individual income in order to increase the coverage of green spaces in a one kilometre radius around them by one hectare.

What does this imply for urban planning and development? We can calculate the net wellbeing benefit in monetary terms that would arise, on average, when increasing the coverage of green spaces in a one kilometre radius around households by one hectare. This is especially interesting in view of the fact that there is, on average, an under-supply of urban green in major German cities: we find that the life-satisfaction maximising amount of green spaces is 33 hectares; on average, however, there are only 23 hectares available. Aggregating the individual willingness-to-pay of 276 Euro over all residents who are affected, we obtain a gross wellbeing benefit in monetary terms of 933,647 Euro. Contrasting this amount with the costs of providing one hectare of green spaces (which varies between 23,333 and 204,000 Euro annually, depending on location and infrastructure) yields a net wellbeing benefit in monetary terms between 729,647 and 910,314 Euro annually.

Of course, this cost-benefit analysis is based only on a partial equilibrium analysis, as it does not take into account the effects of more green spaces on the house prices and rents in its surroundings, as well as other externalities. Nevertheless, it shows that there may be a substantial net wellbeing benefit in monetary terms from reducing the under-supply of green spaces in major cities, and, as the heterogeneity analysis suggests, urban areas with high shares of elderly may profit most. A straightforward, and potentially cost-effective, way to provide more green may be to transform vacant land, if available and feasible, into green spaces. There is a strong case for the preservation of green spaces in inner cities.