THE HAPPINESS‐REDUCING COSTS OF NOISE POLLUTION*

ABSTRACT This analysis examines the costs of everyday residential noise pollution using a series of “happiness regressions.” We control for both the possibility that an unobservable characteristic may cause omitted variable bias, as well as for the possibility of endogeneity bias if “effort” is not adequately taken into account. We find perceived noise pollution to exert a negative and highly significant effect on happiness. We then calculate the required income transfer to compensate for the noise and find the costs of noise pollution to be on the order of €172 per month per household.