The authors examine the role of employee job satisfaction in Finnish manufacturing plants over the period 1996–2001 to determine the extent to which it affects establishment-level productivity. Using matched data on job satisfaction from the European Community Household Panel (ECHP) and information on establishment productivity from longitudinal register data linked to the ECHP, they estimate that the effect of an increase in the establishment's average level of employee job satisfaction on productivity is positive, but its magnitude varies depending on the specification of the model. The authors use an instrumental variables point estimate and find that an increase in the measure of job satisfaction by one within-plant standard deviation increases value-added per hours worked in manufacturing by 6.6%.
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