Working Paper: NBER ID: w23649
Authors: Thorhildur Lafsdottir; Tinna Laufey Sgeirsdottir; Edward C. Norton
Abstract: Chronic pain clearly lowers utility, but it is empirically challenging to estimate the monetary compensation needed to offset this utility reduction. We use the subjective well-being method to estimate the value of pain relief among individuals age 50 and older. We use a sample of 64,205 observations from 4 waves (2008-2014) of the Health and Retirement Study, a nationally representative individual-level survey data, permitting us to control for individual heterogeneity. Our models, which allow for nonlinear effects in income, show the value of avoiding pain ranging between 56 to 145 USD per day. These results are lower than previously reported, suggesting that the value of pain relief varies by income levels. Thus, previous estimates of the value of pain relief assuming constant monetary compensation for pain across income levels are heavily affected by the highest income level. Furthermore, we find that the value of pain relief increases with pain severity.
Keywords: Chronic Pain; Subjective Wellbeing; Monetary Valuation
JEL Codes: I10; I14
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| pain relief (I19) | subjective wellbeing (I31) |
| income (E25) | subjective wellbeing (I31) |
| pain severity (I12) | pain relief (I19) |
| pain relief (I19) | value of pain relief (J17) |
| income levels (J31) | value of pain relief (J17) |
| subjective wellbeing method (I31) | understanding of relationships (L14) |
| functional form of income (E25) | compensating variation for pain relief (J17) |