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Heterogeneity in subjective wellbeing : an application to occupational allocation in Africa

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  • Falco, Paolo
  • Maloney, William F.
  • Rijkers, Bob
  • Sarrias, Mauricio

Abstract

Using an extraordinarily rich panel dataset from Ghana, this paper explores the nature of self-employment and informality in developing countries through the analysis of self-reported happiness with work and life. Subjective job satisfaction measures allow assessment of the relative desirability of different jobs in ways that, conditional wage comparisons cannot. By exploiting recent advances in mixed (random parameter) ordered probit models, the distribution of subjective well-being across sectors of employment is quantified. There is little evidence for the overall inferiority of the small firm informal sector: there is not a robust average satisfaction premium for formal work vs. self-employment or informal salaried work, and owners of informal firms that employ others are on average significantly happier than workers in the formal private sector. Moreover, the estimated distribution of parameters predicting satisfaction reveal substantial heterogeneity in subjective well-being within sectors that conventional fixed parameter models, such as standard ordered probit models, cannot detect: Whatever the average satisfaction premium in a sector, all job categories contain both relatively happy and disgruntled workers. Specifically, roughly 67, 50, 40 and 59 percent prefer being a small-firm employer, sole proprietor, informal salaried, civic worker respectively, than formal work. Hence, there is a high degree of overlap in the distribution of satisfaction across sectors. The results are robust to the inclusion of fixed effects and alternate measures of satisfaction. Job characteristics, self-perceived autonomy and experimentally elicited measures of attitudes toward risk do not appear to explain these distributional patterns.

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Bibliographic Info

Paper provided by The World Bank in its series Policy Research Working Paper Series with number 6244.

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Date of creation: 01 Oct 2012
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Handle: RePEc:wbk:wbrwps:6244

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Keywords: Labor Markets; Labor Policies; Labor Management and Relations; Work&Working Conditions; Educational Policy and Planning;

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Cited by:
  1. Sarah Bridges & Louise Fox & Alessio Gaggero & Trudy Owens, . "Labour Market Entry and Earnings: Evidence from Tanzanian Retrospective Data," Discussion Papers 13/05, University of Nottingham, CREDIT.
  2. Haywood, Luke & Falco, Paolo, 2013. "Entrepreneurship versus Joblessness - Explaining the Rise in Self-Employment," Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order 80016, Verein für Socialpolitik / German Economic Association.
  3. Stefano A. Caria & Paolo Falco, 2014. "Does the Risk of Poverty Reduce Happiness?," Development Working Papers 363, Centro Studi Luca d\'Agliano, University of Milano, revised 07 Apr 2014.

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