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The Happiness Gains from Sorting and Matching in the Labor Market

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Author Info

  • Luechinger, Simon

    ()
    (University of Lucerne)

  • Stutzer, Alois

    ()
    (University of Basel)

  • Winkelmann, Rainer

    ()
    (University of Zurich)

Abstract

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.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 2019.

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Length: 35 pages
Date of creation: Mar 2006
Date of revision:
Publication status: published in: Research in Labor Economics, 2010, 30, 233–251
Handle: RePEc:iza:izadps:dp2019

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Related research

Keywords: matching; ordered probit; public sector employment; selection; subjective well-being; switching regression;

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References

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  1. Bruno S. Frey & Simon Luechinger & Alois Stutzer, 2004. "Valuing Public Goods: The Life Satisfaction Approach," CREMA Working Paper Series, Center for Research in Economics, Management and the Arts (CREMA) 2004-11, Center for Research in Economics, Management and the Arts (CREMA).
  2. George J. Borjas, 1987. "Self-Selection and the Earnings of Immigrants," NBER Working Papers 2248, National Bureau of Economic Research, Inc.
  3. Andrew Clark & Fabien Postel-Vinay, 2005. "Job Security and Job Protection," CEP Discussion Papers, Centre for Economic Performance, LSE dp0678, Centre for Economic Performance, LSE.
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  9. Paul Frijters & John P. Haisken-DeNew & Michael A. Shields, 2004. "Money Does Matter! Evidence from Increasing Real Income and Life Satisfaction in East Germany Following Reunification," American Economic Review, American Economic Association, American Economic Association, vol. 94(3), pages 730-740, June.
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  18. Bruno S. Frey & Alois Stutzer, 2000. "Happiness, Economy and Institutions," CESifo Working Paper Series 246, CESifo Group Munich.
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  20. Alan B. Krueger, 1988. "The determinants of queues for federal jobs," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 41(4), pages 567-581, July.
  21. Hartog, Joop & Ferrer-i-Carbonell, Ada & Jonker, Nicole, 2002. "Linking Measured Risk Aversion to Individual Characteristics," Kyklos, Wiley Blackwell, Wiley Blackwell, vol. 55(1), pages 3-26.
  22. Winkelmann, Liliana & Winkelmann, Rainer, 1998. "Why Are the Unemployed So Unhappy? Evidence from Panel Data," Economica, London School of Economics and Political Science, London School of Economics and Political Science, vol. 65(257), pages 1-15, February.
  23. Don Bellante & Albert N. Link, 1981. "Are public sector workers more risk averse than private sector workers?," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 34(3), pages 408-412, April.
  24. Boes, Stefan & Winkelmann, Rainer, 2004. "Income and Happiness: New Results from Generalized Threshold and Sequential Models," IZA Discussion Papers 1175, Institute for the Study of Labor (IZA).
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Blog mentions

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  1. Living with a weak economy
    by chris dillow in Stumbling and Mumbling on 2011-11-17 15:02:19
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Cited by:
  1. Simon Luechinger & Stephan Meier & Alois Stutzer, 2008. "Why does unemployment hurt the employed?: evidence from the life satisfaction gap between the public and private sectors," Public Policy Discussion Paper, Federal Reserve Bank of Boston 08-1, Federal Reserve Bank of Boston.
  2. Pfeifer, Christian, 2008. "A Note on Risk Aversion and Labour Market Outcomes: Further Evidence from German Survey Data," IZA Discussion Papers 3523, Institute for the Study of Labor (IZA).
  3. Cahit Guven & Bent Sørensen, 2012. "Subjective Well-Being: Keeping Up with the Perception of the Joneses," Social Indicators Research, Springer, Springer, vol. 109(3), pages 439-469, December.
  4. Simon Luechinger & Stephan Meier & Alois Stutzer, 2008. "Why Does Unemployment Hurt the Employed? Evidence from the Life Satisfaction Gap between the Public and the Private Sector," Working papers, Faculty of Business and Economics - University of Basel 2008/02, Faculty of Business and Economics - University of Basel.
  5. Margaretha Buurman & Robert Dur & Seth Van den Bossche, 2009. "Public Sector Employees: Risk Averse and Altruistic?," Tinbergen Institute Discussion Papers 09-067/1, Tinbergen Institute.
  6. Rafael Di Tella & Robert MacCulloch, 2007. "Happiness, Contentment and Other Emotions for Central Banks," NBER Working Papers 13622, National Bureau of Economic Research, Inc.
  7. Pfeifer, Christian, 2008. "Risk Aversion and Sorting into Public Sector Employment," IZA Discussion Papers 3503, Institute for the Study of Labor (IZA).

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