The Happiness Gains from Sorting and Matching in the Labor Market

Sorting of people on the labor market not only assures the most productive use of valuable skills but also generates individual utility gains if people experience an optimal match between job characteristics and their preferences. Based on individual data on reported satisfaction with life it is possible to assess these latter gains from matching. We introduce a two-equation ordered probit model with endogenous switching and study self-selection into government and private sector jobs. We find considerable gains from matching amounting to an increase in the fraction of very satisfied workers from 53.8 to 58.8 percent relative to a hypothetical random allocation of workers to the two sectors.

[1]  Paul Frijters,et al.  Money Does Matter! Evidence from Increasing Real Income and Life Satisfaction in East Germany Following Reunification , 2004 .

[2]  Andrew J. Oswald,et al.  The Macroeconomics of Happiness , 2001, Review of Economics and Statistics.

[3]  Maitreesh Ghatak,et al.  Competition and Incentives with Motivated Agents , 2003 .

[4]  Jeff Borland,et al.  Recent developments in public sector labor markets , 1999 .

[5]  H. James.  VARIETIES OF SELECTION BIAS , 1990 .

[6]  G. Borjas.  Self-Selection and the Earnings of Immigrants , 1987, Foundations of Migration Economics.

[7]  J. Angrist,et al.  Identification and Estimation of Local Average Treatment Effects , 1995 .

[8]  Andrew E. Clark,et al.  Income and happiness: Evidence, explanations and economic implications , 2006 .

[9]  Fabien Postel-Vinay,et al.  Job Security and Job Protection , 2005, SSRN Electronic Journal.

[10]  Jed DeVaro.  Teams, Autonomy, and the Financial Performance of Firms , 2006, SSRN Electronic Journal.

[11]  Pier Luigi Porta,et al.  Economics and happiness : framing the analysis , 2005 .

[12]  Gregory B. Lewis,et al.  Who Wants to Work for the Government , 2002 .

[13]  R. Winkelmann,et al.  Why Are the Unemployed So Unhappy? Evidence from Panel Data , 1998 .

[14]  P. E. Crewson,et al.  Public-Service Motivation: Building Empirical Evidence of Incidence and Effect , 1997 .

[15]  E. Papadakis.  Environmental Politics and Institutional Change: Framing the analysis , 1996 .

[16]  Xiangdong Wei,et al.  Worker Sorting and Job Satisfaction: The Case of Union and Government Jobs , 2002 .

[17]  Alan B. Krueger,et al.  The Determinants of Queues for Federal Jobs , 1988 .

[18]  D. Kahneman,et al.  Well-being : the foundations of hedonic psychology , 1999 .

[19]  Ada Ferrer-i-Carbonell,et al.  Happiness Quantified: A Satisfaction Calculus Approach , 2004 .

[20]  P. Warr.  Well-being and the workplace. , 1999 .

[21]  Alois Stutzer,et al.  The Role of Income Aspirations in Individual Happiness , 2003 .

[22]  B. Frey,et al.  What Can Economists Learn from Happiness Research? , 2001, SSRN Electronic Journal.

[23]  Albert N. Link,et al.  Are Public Sector Workers More Risk Averse Than Private Sector Workers? , 1981 .

[24]  A. Roy.  Some thoughts on the distribution of earnings , 1951 .

[25]  Rainer Winkelmann,et al.  Income and Happiness: New Results from Generalized Threshold and Sequential Models , 2004, SSRN Electronic Journal.

[26]  Erzo F. P. Luttmer.  Neighbors as Negatives: Relative Earnings and Well-Being , 2004 .

[27]  A. Oswald,et al.  Unhappiness and Unemployment , 1994 .

[28]  B. Frey,et al.  Valuing Public Goods: The Life Satisfaction Approach , 2004, SSRN Electronic Journal.

[29]  B. Frey,et al.  Happiness and Economics: How the Economy and Institutions Affect Human Well-Being , 2003 .

[30]  B. Frey,et al.  Happiness, Economy and Institutions , 2000, SSRN Electronic Journal.

[31]  Bruno S. Frey,et al.  Does Marriage Make People Happy, or Do Happy People Get Married? , 2005 .

[32]  Robert J. MacCulloch.  Happiness and Economics: How the Economy and Institutions Affect Well‐being. Bruno Frey and Alois Stutzer. Princeton: Princeton University Press, 2001. ISBN: 0‐691‐06998‐0, 200 pp. Price: $24.95/£17.95 (paperback) , 2003 .

[33]  R. Easterlin.  Building a Better Theory of Well-Being , 2003, SSRN Electronic Journal.

[34]  Avinash Dixit,et al.  # Incentives and Organizations in the Public Sector: An Interpretative Review , 2002 .

[35]  N. Jonker,et al.  Linking Measured Risk Aversion to Individual Characteristics , 2002 .