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.
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