Abstract

Employing data from the Household, Income and Labour Dynamics in Australia survey and the McArthur Forest Fire Danger Index, this study tests: (1) the association between forest fire danger and an individual’s life satisfaction; (2) the association between forest fire danger and an individual’s feeling of safety; and (3) whether the association between forest fire danger and an individual’s life satisfaction is explained by feelings of safety. Further, this study employs the experienced preference method to estimate, in monetary terms, the psychological costs associated with forest fire danger. We find negative and significant associations between life satisfaction and forest fire danger, as well as between forest fire danger and feelings of safety. When feelings of safety are included in the life satisfaction regression, however, the forest fire danger variable is no longer statistically significant – suggesting that the link between forest fire danger and life satisfaction can be largely explained by an individual’s feelings of safety. The experienced preference method yields an implicit willingness-to-pay of $10 per year to avoid a one unit increase in the spatially weighted average of the average daily value of the Fire Danger Index over the previous 12 months.