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Heterogeneity in Subjective Wellbeing: An Application to Occupational Allocation in Africa

  • Falco, Paolo

    ()

    (University of Oxford)

  • Maloney, William F.

    ()

    (World Bank)

  • Rijkers, Bob

    ()

    (World Bank)

  • Sarrias, Mauricio

    ()

    (Cornell University)

By exploiting recent advances in mixed (stochastic parameter) ordered probit estimators and a unique longitudinal dataset from Ghana, this paper examines the distribution of subjective wellbeing across sectors of employment and offers insights into the functioning of developing country labor markets. We find little evidence for the overall inferiority of the small firm informal sector: there is not a robust average satisfaction premium for formal work vis a vis self-employment or informal salaried work and, in fact, informal firm owners who employ others are on average significantly happier than formal workers. Moreover, the estimated underlying random parameter distributions unveil substantial latent heterogeneity in subjective wellbeing around the central tendency that fixed parameter models cannot detect. All job categories contain both relatively happy and disgruntled workers. Concretely, roughly 67%, 50%, 40% and 59% prefer being a small firm employer, sole proprietor, informal salaried, and civic worker respectively, to 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 using 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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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 7057.

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Length: 50 pages
Date of creation: Nov 2012
Date of revision:
Handle: RePEc:iza:izadps:dp7057
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