The Endogeneity Bias in the Relationship between Employee Commitment and Job Satisfaction

The effect of job satisfaction on organisational commitment has attracted a great deal of interest in the human resource management and organizational psychology literatures. However, much of the empirical work is based on relatively small sample sizes and neglects the possibility of endogeneity of job satisfaction, potentially leading to biased estimates of the effect of job satisfaction on organizational commitment. Using a large matched employee-employer dataset this paper re-examines the relationship between the two work-related attitudes by employing micro-econometric techniques to correct for potential endogeneity arising from omitted variables and simultaneity. We show both theoretically and empirically that ignoring the endogeneity leads to overestimate of the effects.