Self-Selection and Subjective-Well Being: Copula Models with an Application to Public and Private Sector Work

24 Pages Posted: 18 Oct 2008

See all articles by Simon Luechinger

Simon Luechinger

University of Lucerne

Alois Stutzer

University of Basel - Faculty of Business and Economics; IZA Institute of Labor Economics

Rainer Winkelmann

University of Zurich - Statistics and Empirical Economic Research; IZA Institute of Labor Economics; Centre for Economic Policy Research (CEPR)

Date Written: October 2008

Abstract

We discuss a new approach to specifying and estimating ordered probit models with endogenous switching, or with binary endogenous regressor, based on copula functions. These models provide a framework of analysis for self-selection in economic well-being equations, where assigment of regressors may be choice based, resulting from well-being maximization, rather than random. In an application to public and private sector job satisfaction, and using data on male workers from the German Socio-Economic Panel, we find that a model based on Frank's copula is prefered over two alternative models with independence and normal copula, respectively. The results suggest that public sector workers are negatively selected.

Keywords: Ordered probit, switching regression, Frank copula, job satisfaction, German Socio-Economic Panel

JEL Classification: I31, C23

Suggested Citation

Luechinger, Simon and Stutzer, Alois and Winkelmann, Rainer, Self-Selection and Subjective-Well Being: Copula Models with an Application to Public and Private Sector Work (October 2008). SOEPpaper No. 135. Available at SSRN: https://ssrn.com/abstract=1285530 or http://dx.doi.org/10.2139/ssrn.1285530

Simon Luechinger (Contact Author)

University of Lucerne ( email )

Frohburgstrasse 3
P.O. Box 4466
Lucerne, 6002
Switzerland

Alois Stutzer

University of Basel - Faculty of Business and Economics ( email )

Peter Merian-Weg 6
4002 Basel
Switzerland
0041 61 267 3361 (Phone)
0041 61 267 3340 (Fax)

HOME PAGE: http://www.wwz.unibas.ch/stutzer/

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Rainer Winkelmann

University of Zurich - Statistics and Empirical Economic Research ( email )

Raemistrasse 62
CH-8001 Zurich
Switzerland
++41 1 634 2292 (Phone)
++41 1 634 4996 (Fax)

HOME PAGE: http://www.unizh.ch/sts/

IZA Institute of Labor Economics ( email )

P.O. Box 7240
Bonn, D-53072
Germany
+49 228 3894 503 (Phone)
+49 228 3894 510 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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