This
paper aims to examine if a simultaneous relationship exists between life
satisfaction and employment status. A sample of 2,576 Irish adults obtained
from the European Social Survey 5 is used to test this hypothesis. A two-stage
probit least squares technique estimates life satisfaction and employment
status simultaneously and accounts for the endogeneity present in the equations
in the system. The findings suggest a bi-directional relationship between life
satisfaction and employment status that is, employment affects life satisfaction
but also being satisfied with life increases the predicted probability of being
employed. Furthermore, this paper finds that the effect of employment status on
life satisfaction (as well as the reverse direction effect) is underestimated
if simultaneous endogeneity is not accounted for.