This paper investigates the causal eﬀect of education on life satisfaction, exploring eﬀect heterogeneity along employment status. We use exogenous variation in compulsory schooling requirements and the build-up of new, academically more demanding schools, shifting educational attainment along the entire distribution of schooling. Leveraging plant closures and longitudinal information, we also address the endogeneity of employment status. We ﬁnd a positive eﬀect of education on life satisfaction for employed individuals, but a negative one for those without a job. We propose an aspiration-augmented utility function as a unifying explanation for the asymmetric eﬀect of education on life satisfaction.
Keywords: Education, Life satisfaction, Employment status, Compulsory schooling reforms, School openings, Instrumental variable estimation