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 for the Study of Labor (IZA).
    • Handle: RePEc:iza:izadps:dp2019
    as

    Download full text from publisher

    File URL: http://ftp.iza.org/dp2019.pdf
    Download Restriction: no

    Other versions of this item:

    References listed on IDEAS

    as
    1. 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.
    2. Alan B. Krueger, 1988. "The Determinants of Queues for Federal Jobs," ILR Review, Cornell University, ILR School, vol. 41(4), pages 567-581, July.
    3. Timothy Besley & Maitreesh Ghatak, 2005. "Competition and Incentives with Motivated Agents," American Economic Review, American Economic Association, vol. 95(3), pages 616-636, June.
    4. Stutzer, Alois, 2004. "The role of income aspirations in individual happiness," Journal of Economic Behavior & Organization, Elsevier, vol. 54(1), pages 89-109, May.
    5. Frey, Bruno S & Stutzer, Alois, 2000. "Happiness, Economy and Institutions," Economic Journal, Royal Economic Society, vol. 110(466), pages 918-938, October.
    6. Clark, Andrew E & Oswald, Andrew J, 1994. "Unhappiness and Unemployment," Economic Journal, Royal Economic Society, vol. 104(424), pages 648-659, May.
    7. 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.
    8. 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.
    9. Erzo F. P. Luttmer, 2005. "Neighbors as Negatives: Relative Earnings and Well-Being," The Quarterly Journal of Economics, Oxford University Press, vol. 120(3), pages 963-1002.
    10. 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.
    11. 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.
    12. Jed DeVaro, 2005. "Teams, Autonomy, and the Financial Performance of Firms," Labor and Demography 0508004, EconWPA.
    13. 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.
    14. Gruber Jonathan H & Mullainathan Sendhil, 2005. "Do Cigarette Taxes Make Smokers Happier," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 5(1), pages 1-45, July.
    15. Heckman, James J, 1990. "Varieties of Selection Bias," American Economic Review, American Economic Association, vol. 80(2), pages 313-318, May.
    16. Borjas, George J, 1987. "Self-Selection and the Earnings of Immigrants," American Economic Review, American Economic Association, vol. 77(4), pages 531-553, September.
    17. 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.
    18. 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.
    19. 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.
    20. 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.
    21. 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.
    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. Andrew E. Clark & Paul Frijters & Michael A. Shields, 2006. "Income and happiness: Evidence, explanations and economic implications," PSE Working Papers halshs-00590436, HAL.
    24. 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.
    25. A. D. Roy, 1951. "Some Thoughts On The Distribution Of Earnings," Oxford Economic Papers, Oxford University Press, vol. 3(2), pages 135-146.
    26. 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.
    27. 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.
    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. 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. 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.
    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. Robin Zoutenbier, 2014. "The Impact of Matching Mission Preferences on Well-being at Work," Tinbergen Institute Discussion Papers 14-036/I, Tinbergen Institute.
    6. 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.
    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. 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 08-1, Federal Reserve Bank of Boston.
    9. Rafael Di Tella & Robert MacCulloch, 2007. "Happiness, Contentment and Other Emotions for Central Banks," NBER Working Papers 13622, National Bureau of Economic Research, Inc.
    10. 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.

    More about this item

    Keywords

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

    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.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Mark Fallak). General contact details of provider: http://www.iza.org .

    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 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.

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

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.