Job Satisfaction and Reference Wages: Evidence for a Developing Country

The disadvantage of parametric methods is that they impose a functional structure to the data without taking into account the nature of the data.

See Appendix 1.

See Appendix 2.

It is easy to note that this approach (and the next one too) assumes that the reference group is exogenous, i.e. the econometrician decides on the relevant persons in order to construct the reference group. Obviously, this does not have to be carried out in such a way, but the information available for Chile does not allow us to endogenize the construction of the reference group. For instance, Clark and Senik (2009), using data from the European Social Survey, investigate who the individuals are with whom people compare themselves. They find that colleagues are the most frequently cited reference group. Incorporating this information represents a major source of improvement for job satisfaction estimates and the future research agenda should take this into consideration.

The authors suggest constructing the rank as follows:

\(R_{ig} = \frac{{P_{ig} - 1}}{{N_{g} - 1}}\)

where P _ig is the position of individual i in group g and N _g is the number of individuals in the group.

See Appendix 3.

See Appendix 2.

Our R ² ranges from 0.0325 to 0.1022, which is not very different from that presented by Van Praag et al. (2003).

The critical value of a Chi squared distribution at 5 % is 7.81.

Consider also the following. Figures 2, 3 and 4 show the estimated density for models (1), (2) and (3), respectively, using K = 4. Clearly, the distribution exhibits important differences from normal (more leptokurtic) distribution. Given this background, it would be wrong to estimate the models assuming normality.