Heterogeneity in subjective wellbeing: An application to occupational allocation in Africa

• Published in: Journal of economic behavior & organization Vol. 111; pp. 137 - 153
• Main Authors: Falco, Paolo, Maloney, William F., Rijkers, Bob, Sarrias, Mauricio
• Format: Journal Article
• Language: English
• Published: Amsterdam Elsevier B.V 01.03.2015; Elsevier; Elsevier Sequoia S.A
• Subjects: Africa; Developing country labor market; Developing country labor markets; Employee attitude; Employment; Informal economy; Informality; Mixed ordered probit; Parameter estimation; Quality of work; Self-employment; Small business; Stochastic models; Studies; Subjective wellbeing; Ghana; Africa; Self-employment; C35; J41; Subjective wellbeing; Informality; Africa; J2; J3; I32; L26; Mixed ordered probit; Developing country labor markets; 017
• ISSN: 0167-2681; 1879-1751
• DOI: 10.1016/j.jebo.2014.12.022

•Using mixed ordered probit estimators and panel data, we examine the distribution of subjective well-being across sectors of employment in Ghana.•We find little evidence for the overall inferiority of the small scale informal sector relative to the formal salaried sector at the conditional mean.•Being self-employed and having employees is associated with a positive average satisfaction premium.•The sectoral distributions of satisfaction overlap considerably.•All job categories contain substantial shares of both relatively happy and disgruntled workers. 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. We find little evidence for the overall inferiority of the small firm informal sector relative to the formal salaried sector at the conditional mean. 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 substantial shares of both relatively happy and disgruntled workers.