Measuring the monetary value of social relations: A hedonic approach

• We use the hedonic approach to measure the monetary price of social relations.
• We use housing and labor market data at individual-level for 103 Italian cities.
• People are willing to pay a large monetary price to live in cities where people spend more time with their friends.
• Quality of relational life is highest in small-medium cities of the Center-South.
• Subjective and objective indicators of quality of social relations are consistent.

This paper presents an application of the hedonic approach to measure the monetary price of social relations. We use micro data for housing and labor markets in the 103 Italian province capitals to estimate the price of relational amenities and construct monetary indices of quality of relational life. We focus on time spent with friends, active participation in associations and frequency of going out for leisure activities as relational amenities, while controlling for standard amenities such as weather, environment, services, and socio-demographic characteristics. We find that individuals are willing to pay a positive and significant monetary price to live in cities where people spend more time with their friends. A one standard deviation increase in the share of those who meet their friends most frequently is worth an extra € 1150 per year in terms of higher housing costs and foregone wages.