IDEAS home Printed from https://ideas.repec.org/p/iza/izadps/dp2019.html
   My bibliography  Save this paper

The Happiness Gains from Sorting and Matching in the Labor Market

Author

Listed:
  • 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.

Suggested Citation

  • Luechinger, Simon & Stutzer, Alois & Winkelmann, Rainer, 2006. "The Happiness Gains from Sorting and Matching in the Labor Market," IZA Discussion Papers 2019, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp2019
    as

    Download full text from publisher

    File URL: https://docs.iza.org/dp2019.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Alan B. Krueger, 1988. "The Determinants of Queues for Federal Jobs," ILR Review, Cornell University, ILR School, vol. 41(4), pages 567-581, July.
    2. Andrew Clark & Fabien Postel-Vinay, 2009. "Job security and job protection," Oxford Economic Papers, Oxford University Press, vol. 61(2), pages 207-239, April.
    3. Stutzer, Alois, 2004. "The role of income aspirations in individual happiness," Journal of Economic Behavior & Organization, Elsevier, vol. 54(1), pages 89-109, May.
    4. Clark, Andrew E & Oswald, Andrew J, 1994. "Unhappiness and Unemployment," Economic Journal, Royal Economic Society, vol. 104(424), pages 648-659, May.
    5. Bruno S. Frey & Simon Luechinger & Alois Stutzer, "undated". "Valuing Public Goods: The Life Satisfaction Approach," IEW - Working Papers 184, Institute for Empirical Research in Economics - University of Zurich.
    6. Erzo F. P. Luttmer, 2005. "Neighbors as Negatives: Relative Earnings and Well-Being," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 120(3), pages 963-1002.
    7. Andrew E. Clark & Paul Frijters & Michael A. Shields, 2006. "Income and happiness: Evidence, explanations and economic implications," PSE Working Papers halshs-00590436, HAL.
    8. Bruno S. Frey & Alois Stutzer, 2002. "What Can Economists Learn from Happiness Research?," Journal of Economic Literature, American Economic Association, vol. 40(2), pages 402-435, June.
    9. Imbens, Guido W & Angrist, Joshua D, 1994. "Identification and Estimation of Local Average Treatment Effects," Econometrica, Econometric Society, vol. 62(2), pages 467-475, March.
    10. Jonathan Gruber & Sendhil Mullainathan, 2006. "Do Cigarette Taxes Make Smokers Happier?," Palgrave Macmillan Books, in: Yew-Kwang Ng & Lok Sang Ho (ed.), Happiness and Public Policy, chapter 6, pages 109-146, Palgrave Macmillan.
    11. Timothy Besley & Maitreesh Ghatak, 2005. "Competition and Incentives with Motivated Agents," American Economic Review, American Economic Association, vol. 95(3), pages 616-636, June.
    12. 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.
    13. Stutzer, Alois & Frey, Bruno S., 2006. "Does marriage make people happy, or do happy people get married?," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 35(2), pages 326-347, April.
    14. Joop Hartog & Ada Ferrer‐i‐Carbonell & Nicole Jonker, 2002. "Linking Measured Risk Aversion to Individual Characteristics," Kyklos, Wiley Blackwell, vol. 55(1), pages 3-26.
    15. Rafael Di Tella & Robert J. MacCulloch & Andrew J. Oswald, 2003. "The Macroeconomics of Happiness," The Review of Economics and Statistics, MIT Press, vol. 85(4), pages 809-827, November.
    16. repec:eee:labchp:v:1:y:1986:i:c:p:641-692 is not listed on IDEAS
    17. A. D. Roy, 1951. "Some Thoughts On The Distribution Of Earnings," Oxford Economic Papers, Oxford University Press, vol. 3(2), pages 135-146.
    18. George J. Borjas, 2021. "Self-Selection and the Earnings of Immigrants," World Scientific Book Chapters, in: Foundational Essays in Immigration Economics, chapter 4, pages 69-91, World Scientific Publishing Co. Pte. Ltd..
    19. Don Bellante & Albert N. Link, 1981. "Are Public Sector Workers More Risk Averse Than Private Sector Workers?," ILR Review, Cornell University, ILR School, vol. 34(3), pages 408-412, April.
    20. Frey, Bruno S & Stutzer, Alois, 2000. "Happiness, Economy and Institutions," Economic Journal, Royal Economic Society, vol. 110(466), pages 918-938, October.
    21. 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.
    22. Jed DeVaro, 2005. "Teams, Autonomy, and the Financial Performance of Firms," Labor and Demography 0508004, University Library of Munich, Germany.
    23. Heckman, James J, 1990. "Varieties of Selection Bias," American Economic Review, American Economic Association, vol. 80(2), pages 313-318, May.
    24. Liliana Winkelmann & Rainer Winkelmann, 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.
    25. Andrew E. Clark & Paul Frijters & Michael A. Shields, 2006. "Income and Happiness: Evidence, Explanations and Economic Implications. Working paper #5," NCER Working Paper Series 5, National Centre for Econometric Research.
    26. Avinash Dixit, 2002. "# Incentives and Organizations in the Public Sector: An Interpretative Review," Journal of Human Resources, University of Wisconsin Press, vol. 37(4), pages 696-727.
    27. 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.
    28. 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.
    29. John S. Heywood & W. S. Siebert & Xiangdong Wei, 2002. "Worker Sorting and Job Satisfaction: The Case of Union and Government Jobs," ILR Review, Cornell University, ILR School, vol. 55(4), pages 595-609, July.
    Full references (including those not matched with items on IDEAS)

    Citations

    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Living with a weak economy
      by chris dillow in Stumbling and Mumbling on 2011-11-17 21:02:19

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Simon Luechinger & Stephan Meier & Alois Stutzer, 2010. "Why Does Unemployment Hurt the Employed?: Evidence from the Life Satisfaction Gap Between the Public and the Private Sector," Journal of Human Resources, University of Wisconsin Press, vol. 45(4), pages 998-1045.
    2. Simon Luechinger & Stephan Meier & Alois Stutzer, 2010. "Why Does Unemployment Hurt the Employed?: Evidence from the Life Satisfaction Gap Between the Public and the Private Sector," Journal of Human Resources, University of Wisconsin Press, vol. 45(4), pages 998-1045.
    3. Robin Zoutenbier, 2016. "The impact of matching mission preferences on well-being at work," Economics of Governance, Springer, vol. 17(3), pages 295-315, August.
    4. Buurman, Margaretha & Delfgaauw, Josse & Dur, Robert & Van den Bossche, Seth, 2012. "Public sector employees: Risk averse and altruistic?," Journal of Economic Behavior & Organization, Elsevier, vol. 83(3), pages 279-291.
    5. Antonio Di Paolo, 2012. "(Endogenous) occupational choices and job satisfaction among recent PhD recipients: evidence from Catalonia," Working Papers XREAP2012-21, Xarxa de Referència en Economia Aplicada (XREAP), revised Dec 2012.
    6. Prümer, Stephanie, 2019. "Ist der Staat der bessere Arbeitgeber? Arbeitsqualität im Öffentlichen und Privaten Sektor in Deutschland," Discussion Papers 107, Friedrich-Alexander University Erlangen-Nuremberg, Chair of Labour and Regional Economics.
    7. Christian Pfeifer, 2011. "Risk Aversion and Sorting into Public Sector Employment," German Economic Review, Verein für Socialpolitik, vol. 12(1), pages 85-99, February.
    8. Cahit Guven & Bent Sørensen, 2012. "Subjective Well-Being: Keeping Up with the Perception of the Joneses," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 109(3), pages 439-469, December.
    9. Molnár, György & Kapitány, Zsuzsa, 2013. "Munkahely a közszférában. Biztonság és hivatás, a szubjektív szempontok szerepe [Public sector employment. Security and social mission- the role of subjective aspects]," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(7), pages 781-813.
    10. Danzer, Natalia, 2019. "Job satisfaction and self-selection into the public or private sector: Evidence from a natural experiment," Labour Economics, Elsevier, vol. 57(C), pages 46-62.
    11. Prümer, Stephanie, 2021. "Sector switching in Germany," Discussion Papers 122, Friedrich-Alexander University Erlangen-Nuremberg, Chair of Labour and Regional Economics.
    12. Pfeifer, Christian, 2008. "A Note on Risk Aversion and Labour Market Outcomes: Further Evidence from German Survey Data," IZA Discussion Papers 3523, Institute of Labor Economics (IZA).
    13. SeEun Jung, 2017. "The gender wage gap and sample selection via risk attitudes," International Journal of Manpower, Emerald Group Publishing Limited, vol. 38(2), pages 318-335, May.
    14. Robin Zoutenbier, 2014. "The Impact of Matching Mission Preferences on Well-being at Work," Tinbergen Institute Discussion Papers 14-036/I, Tinbergen Institute.
    15. Rafael Di Tella & Robert MacCulloch, 2007. "Happiness, Contentment and Other Emotions for Central Banks," NBER Working Papers 13622, National Bureau of Economic Research, Inc.
    16. Sean Nicholson-Crotty & Jill Nicholson-Crotty & Sean Webeck, 2019. "Are public managers more risk averse? Framing effects and status quo bias across the sectors," Journal of Behavioral Public Administration, Center for Experimental and Behavioral Public Administration, vol. 2(1).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Leonardo Becchetti & Alessandra Pelloni, 2013. "What are we learning from the life satisfaction literature?," International Review of Economics, Springer;Happiness Economics and Interpersonal Relations (HEIRS), vol. 60(2), pages 113-155, June.
    2. Leonardo Becchetti & Elena Giachin Ricca & Alessandra Pelloni, 2009. "The 60s Turnaround as a Test on the Causal Relationship between Sociability and Happiness," SOEPpapers on Multidisciplinary Panel Data Research 209, DIW Berlin, The German Socio-Economic Panel (SOEP).
    3. Ada Ferrer-i-Carbonell, 2013. "Happiness economics," SERIEs: Journal of the Spanish Economic Association, Springer;Spanish Economic Association, vol. 4(1), pages 35-60, March.
    4. Di Tella, Rafael & MacCulloch, Robert, 2008. "Gross national happiness as an answer to the Easterlin Paradox?," Journal of Development Economics, Elsevier, vol. 86(1), pages 22-42, April.
    5. Bruno Frey & Alois Stutzer, 2005. "Happiness Research: State and Prospects," Review of Social Economy, Taylor & Francis Journals, vol. 63(2), pages 207-228.
    6. Roberta Distante, 2013. "Subjective Well-Being, Income and Relative Concerns in the UK," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 113(1), pages 81-105, August.
    7. Andrew E. Clark & Paul Frijters & Michael A. Shields, 2006. "Income and happiness: Evidence, explanations and economic implications," PSE Working Papers halshs-00590436, HAL.
    8. David G. Blanchflower & Andrew J. Oswald, 2004. "Money, Sex and Happiness: An Empirical Study," Scandinavian Journal of Economics, Wiley Blackwell, vol. 106(3), pages 393-415, October.
    9. Leonardo Becchetti & Stefano Castriota & Nazaria Solferino, 2011. "Development Projects and Life Satisfaction: An Impact Study on Fair Trade Handicraft Producers," Journal of Happiness Studies, Springer, vol. 12(1), pages 115-138, March.
    10. Leonardo Becchetti & Alessandra Pelloni & Fiammetta Rossetti, 2008. "Relational Goods, Sociability, and Happiness," Kyklos, Wiley Blackwell, vol. 61(3), pages 343-363, August.
    11. Bruno S. Frey & Alois Stutzer, 2006. "Should We Maximize National Happiness?," IEW - Working Papers 306, Institute for Empirical Research in Economics - University of Zurich.
    12. Molina, José Alberto & Navarro Paniagua, Maria & Walker, Ian, 2007. "Mums and Their Sons, Dads and Their Daughters: Panel Data Evidence of Interdependent Marginal Utilities across 14 EU Countries," IZA Discussion Papers 2734, Institute of Labor Economics (IZA).
    13. Becchetti, Leonardo & Rossetti, Fiammetta, 2009. "When money does not buy happiness: The case of "frustrated achievers"," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 38(1), pages 159-167, January.
    14. Tekin Kose & Julide Yildirim & Gizem Tanrivere, 2017. "The Effects of Terrorism on Happiness: Evidence from Turkey," EcoMod2017 10229, EcoMod.
    15. Oswald, Andrew J. & Powdthavee, Nattavudh, 2008. "Does happiness adapt? A longitudinal study of disability with implications for economists and judges," Journal of Public Economics, Elsevier, vol. 92(5-6), pages 1061-1077, June.
    16. Powdthavee, Nattavudh & Stutzer, Alois, 2014. "Economic Approaches to Understanding Change in Happiness," IZA Discussion Papers 8131, Institute of Labor Economics (IZA).
    17. McBride, Michael, 2010. "Money, happiness, and aspirations: An experimental study," Journal of Economic Behavior & Organization, Elsevier, vol. 74(3), pages 262-276, June.
    18. Odermatt, Reto & Stutzer, Alois, 2017. "Subjective Well-Being and Public Policy," IZA Discussion Papers 11102, Institute of Labor Economics (IZA).
    19. Kavetsos, Georgios & Szymanski, Stefan, 2010. "National well-being and international sports events," Journal of Economic Psychology, Elsevier, vol. 31(2), pages 158-171, April.
    20. Andrew E. Clark, 2018. "Four Decades of the Economics of Happiness: Where Next?," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 64(2), pages 245-269, June.

    More about this item

    Keywords

    ;
    ;
    ;
    ;
    ;
    ;

    JEL classification:

    • D60 - Microeconomics - - Welfare Economics - - - General
    • I31 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - General Welfare, Well-Being
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J45 - Labor and Demographic Economics - - Particular Labor Markets - - - Public Sector Labor Markets

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:iza:izadps:dp2019. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Holger Hinte (email available below). General contact details of provider: https://edirc.repec.org/data/izaaade.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.