HUMAN CAPITAL, MATCHING AND JOB SATISFACTION

The idea of using job satisfaction to proxy match quality has recently been discussed
in the literature on job matching by Ferreira and Taylor (2011) and additionally there is a
much older literature which argues that, because job satisfaction reduces individuals’
disutility of effort, it increases workers’ productivity, Freeman (1978). Freeman and a number
of studies, Borjas (1979) and Theodossiou and Zangelidis (2009) to name but two others also
report a negative relationship between tenure and job satisfaction. The contribution of this
paper is to use an artefact of a recent paper by Barmby and Eberth (2008) to explain this.
Barmby and Eberth (2008) were seeking to explain a puzzle in Human Capital theory
raised by Medoff and Abraham (1980), and the curious reader is referred to their paper for
full details on this, but the theory implied that match quality and tenure would be negatively
related. It therefore follows that if the theory we outline in section two is correct and job
satisfaction is indeed a measure of match quality then we should see a negative relationship
between job satisfaction and tenure. To further support the finding we estimate job
satisfaction equations using matched employer-employee data which is described in section
three. Section four reports our estimation of job satisfaction equations. Section five
concludes.

2. Theory
We start by considering the wage a worker receives in her current firm and offers

to download http://www.niesr.ac.uk/pdf/200312_201643.pdf

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