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The Happiness Gains from Sorting and Matching in the Labor Market

  • Luechinger, Simon

    ()

    (University of Lucerne)

  • Stutzer, Alois

    ()

    (University of Basel)

  • Winkelmann, Rainer

    ()

    (University of Zurich)

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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File URL: http://ftp.iza.org/dp2019.pdf
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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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  2. Winkelmann, Liliana & Winkelmann, Rainer, 1998. "Why Are the Unemployed So Unhappy? Evidence from Panel Data," Economica, London School of Economics and Political Science, vol. 65(257), pages 1-15, February.
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  4. Luttmer, Erzo F. P., 2004. "Neighbors as Negatives: Relative Earnings and Well-Being," Working Paper Series rwp04-029, Harvard University, John F. Kennedy School of Government.
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  12. 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, vol. 94(3), pages 730-740, June.
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  15. George J. Borjas, 2002. "The Wage Structure and the Sorting of Workers into the Public Sector," NBER Working Papers 9313, National Bureau of Economic Research, Inc.
  16. Bruno S. Frey & Alois Stutzer, . "Happiness, Economy and Institutions," IEW - Working Papers 015, Institute for Empirical Research in Economics - University of Zurich.
  17. Bruno S. Frey & Simon Luechinger & Alois Stutzer, . "Valuing Public Goods: The Life Satisfaction Approach," IEW - Working Papers 184, Institute for Empirical Research in Economics - University of Zurich.
  18. 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.
  19. Hartog, Joop & Ferrer-i-Carbonell, Ada & Jonker, Nicole, 2002. "Linking Measured Risk Aversion to Individual Characteristics," Kyklos, Wiley Blackwell, vol. 55(1), pages 3-26.
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  22. Stefan Boes & Rainer Winkelmann, 2004. "Income and Happiness: New Results from Generalized Threshold and Sequential Models," SOI - Working Papers 0407, Socioeconomic Institute - University of Zurich.
  23. Gregory, Robert G. & Borland, Jeff, 1999. "Recent developments in public sector labor markets," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 53, pages 3573-3630 Elsevier.
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