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

50 Pages Posted: 15 Dec 2012

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

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.

Keywords: subjective wellbeing, mixed ordered probit, self-employment, informality, developing country labor markets, Africa

JEL Classification: C35, J2, J3, J41, L26, I32, O17

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. IZA Discussion Paper No. 7057. Available at SSRN: https://ssrn.com/abstract=2189795

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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