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

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  • Falco, Paolo

    () (OECD)

  • Maloney, William F.

    () (World Bank)

  • Rijkers, Bob

    () (World Bank)

  • Sarrias, Mauricio

    () (Cornell University)

Abstract

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.

Suggested Citation

  • Falco, Paolo & Maloney, William F. & Rijkers, Bob & Sarrias, Mauricio, 2012. "Heterogeneity in Subjective Wellbeing: An Application to Occupational Allocation in Africa," IZA Discussion Papers 7057, Institute for the Study of Labor (IZA).
  • Handle: RePEc:iza:izadps:dp7057
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. repec:spr:jhappi:v:19:y:2018:i:6:d:10.1007_s10902-017-9858-x is not listed on IDEAS
    2. Louise Fox, 2015. "Are African Households Heterogeneous Agents?; Stylized Facts on Patterns of Consumption, Employment, Income and Earnings for Macroeconomic Modelers," IMF Working Papers 15/102, International Monetary Fund.
    3. repec:jss:jstsof:v:074:i10 is not listed on IDEAS
    4. International Labour Office., 2013. "Global employment trends for youth 2013 : a generation at risk," Global Employment Trends Reports 994816973402676, International Labour Office, Economic and Labour Market Analysis Department.
    5. Falco, Paolo & Maloney, William F. & Rijkers, Bob & Sarrias, Mauricio, 2015. "Heterogeneity in subjective wellbeing: An application to occupational allocation in Africa," Journal of Economic Behavior & Organization, Elsevier, vol. 111(C), pages 137-153.
    6. 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.
    7. Sarah Bridges & Louise Fox & Alessio Gaggero & Trudy Owens, "undated". "Labour Market Entry and Earnings: Evidence from Tanzanian Retrospective Data," Discussion Papers 13/05, University of Nottingham, CREDIT.
    8. Falco, Paolo & Haywood, Luke, 2016. "Entrepreneurship versus joblessness: Explaining the rise in self-employment," Journal of Development Economics, Elsevier, vol. 118(C), pages 245-265.
    9. Thomas Markussen & Maria Fibæk & Finn Tarp & Nguyen Do Anh Tuan, 2018. "The Happy Farmer: Self-Employment and Subjective Well-Being in Rural Vietnam," Journal of Happiness Studies, Springer, vol. 19(6), pages 1613-1636, August.
    10. McKay, Andy & Newell, Andrew T. & Rienzo, Cinzia, 2018. "Job Satisfaction among Young Workers in Eastern and Southern Africa: A Comparative Analysis," IZA Discussion Papers 11380, Institute for the Study of Labor (IZA).

    More about this item

    Keywords

    subjective wellbeing; mixed ordered probit; self-employment; informality; developing country labor markets; Africa;

    JEL classification:

    • C35 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions
    • J2 - Labor and Demographic Economics - - Demand and Supply of Labor
    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs
    • J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts
    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship
    • I32 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Measurement and Analysis of Poverty
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements

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