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

50 Pages Posted: 20 Apr 2016

See all articles by Paolo Falco

Paolo Falco

University of Oxford - Centre of the Study of African Economies

William F. Maloney

World Bank - Poverty and Economic Management Unit; IZA Institute of Labor Economics; World Bank - Development Research Group (DECRG)

Bob Rijkers

World Bank

Mauricio Sarrias

Universidad Católica Del Norte

Multiple version iconThere are 3 versions of this paper

Date Written: October 1, 2012

Abstract

Using an extraordinarily rich panel dataset from Ghana, this paper explores the nature of self-employment and informality in developing countries through the analysis of self-reported happiness with work and life. Subjective job satisfaction measures allow assessment of the relative desirability of different jobs in ways that, conditional wage comparisons cannot. By exploiting recent advances in mixed (random parameter) ordered probit models, the distribution of subjective well-being across sectors of employment is quantified. There is little evidence for the overall inferiority of the small firm informal sector: there is not a robust average satisfaction premium for formal work vs. self-employment or informal salaried work, and owners of informal firms that employ others are on average significantly happier than workers in the formal private sector. Moreover, the estimated distribution of parameters predicting satisfaction reveal substantial heterogeneity in subjective well-being within sectors that conventional fixed parameter models, such as standard ordered probit models, cannot detect: Whatever the average satisfaction premium in a sector, all job categories contain both relatively happy and disgruntled workers. Specifically, roughly 67, 50, 40 and 59 percent prefer being a small-firm employer, sole proprietor, informal salaried, civic worker respectively, than 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 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.

Keywords: Labor Markets, Labor Policies, Labor Management and Relations, Work & Working Conditions, Educational Policy and Planning

Suggested Citation

Falco, Paolo and Maloney, William F. and Rijkers, Bob and Sarrias, Mauricio, Heterogeneity in Subjective Wellbeing: An Application to Occupational Allocation in Africa (October 1, 2012). World Bank Policy Research Working Paper No. 6244. Available at SSRN: https://ssrn.com/abstract=2165682

Paolo Falco (Contact Author)

University of Oxford - Centre of the Study of African Economies ( email )

Mansfield Road
Oxford, Oxfordshire OX1 4AU
United Kingdom

William F. Maloney

World Bank - Poverty and Economic Management Unit ( email )

1818 H Street NW
Washington, DC 20433
United States
202-473-6340 (Phone)
202-522-0054 (Fax)

IZA Institute of Labor Economics

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

World Bank - Development Research Group (DECRG)

1818 H. Street, N.W.
MSN3-311
Washington, DC 20433
United States

Bob Rijkers

World Bank ( email )

1818 H Street, NW
Washington, DC 20433
United States

Mauricio Sarrias

Universidad Católica Del Norte

Avenida Angamos 0610
Antofagasta, II Region 1270709
Chile

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