Jobs as Lancaster Goods: Facets of Job Satisfaction and Overall Job Satisfaction

Overall job satisfaction is likely to reflect the combination of partial satisfactions related to various features of one’s job, such as pay, security, the work itself, working conditions, working hours, and the like. The level of overall job satisfaction emerges as the weighted outcome of the individual’s job satisfaction with each of these facets. Thus, jobs are given a status similar to that of commodities in Lancaster’s theory of consumption behaviour. The purpose of this study is to determine the extent and the importance of partial satisfactions in affecting and explaining overall job satisfaction. The study uses eight waves of the European Community Household Panel for ten EU countries and an econometric methodology which not only overcomes a variety of econometric problems introduced by the two-layer model used, but also accounts for unobserved heterogeneity by exploiting the longitudinal dimension of the data. The results show that the different facets of job satisfaction are explained by observed individual and firm characteristics. This suggests that these facets of job satisfaction are in fact strongly interrelated. For all the EU countries examined in this study and in both the short and the long run, satisfaction with the type of work emerges as the most important determinant of overall job satisfaction. JEL classification: C23, C25, I31