Does the decision to participate in the labour market affect people’s subjective well-being?

This article provides evidence regarding the potential effect of labour participation on life satisfaction. To take into account possible endogeneity in the decision to participate in the labour market, a two-stage least squares estimation is carried out. Hence, an excluded instrument is used for the decision to participate, where the existence of a weak instrument is rejected. Then, to take into account the ordinal nature of the dependent variable, an ordered probit model with a binary endogenous explanatory variable is estimated. This method makes it possible to jointly estimate all the parameters of the model. The results, which are robust to the presence of endogeneity in the decision to participate, show that labour participation does not have an impact on life satisfaction. Regarding the rest of the explanatory variables included in the model, the results are in line with previous empirical evidence.