Does unemployment hurt less if there is more of it around? A panel analysis of life satisfaction in Germany and Switzerland

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Type
Report: a report published by a school or other institution, usually numbered within a series.
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Working paper: Working papers contain results presented by the author. Working papers aim to stimulate discussions between scientists with interested parties, they can also be the basis to publish articles in specialized journals
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Title
Does unemployment hurt less if there is more of it around? A panel analysis of life satisfaction in Germany and Switzerland
Author(s)
Oesch D. Lipps O. 
Institution details
SOEP papers on Multidisciplinary Panel Data Research
ISSN-L
1864-6689
Issued date
2011
Number
393
Language
english
Abstract
This paper examines the existence of a habituation effect to unemployment: Do theunemployed suffer less from job loss if unemployment is more widespread, if their ownunemployment lasts longer and if unemployment is a recurrent experience? Theunderlying idea is that unemployment hysteresis may operate through a sociologicalchannel: if many people in the community lose their job and remain unemployed over anextended period, the psychological cost of being unemployed diminishes and the pressureto accept a new job declines. We analyze this question with individual-level data from theGerman Socio-Economic Panel (1984-2009) and the Swiss Household Panel (2000-2009). We find no evidence for a mitigating effect of high surrounding unemployment onunemployed individuals' subjective well-being: Becoming unemployed hurts as muchwhen regional unemployment is high as when it is low. Likewise, the strongly harmfulimpact of being unemployed on well-being does not wear off over time, nor do repeatedepisodes of unemployment make it any better. It thus appears doubtful that anunemployment shock becomes persistent because the unemployed become used to, andhence reasonably content with, being without a job.
Keywords
subjective well-being, unemployment, hysteresis, happiness, social norm
Create date
07/11/2011 12:51
Last modification date
20/08/2019 15:54
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