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Jobless, Friendless and Broke: What Happens to Different Areas of Life Before and After Unemployment?

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  • Nattavudh Powdthavee

Abstract

Using a nationally representative longitudinal data of the British people, this paper explores how different areas of a person's life are affected by unemployment. We find evidence that unemployment is preceded, on average, by a year of dissatisfaction with one's finance and job. Once unemployed, the individuals go through a period of financial worries, social isolation, and health loss, as well as fluctuations in marital quality. While the unemployed fully adapt to the drop in health satisfaction, adaptation in other areas of life is less complete. We also find that it makes virtually no difference to the life satisfaction-path before and after unemployment whether one assumes unemployment to affect life satisfaction directly or indirectly via its impacts on different life domains. Finally, the paper discusses the use of instrumented income to estimate the sums required to compensate individuals for each year that they spend in unemployment.

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Bibliographic Info

Article provided by London School of Economics and Political Science in its journal Economica.

Volume (Year): 79 (2012)
Issue (Month): 315 (07)
Pages: 557-575

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Handle: RePEc:bla:econom:v:79:y:2012:i:315:p:557-575

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Citations

Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. Diversifying mental states
    by chris dillow in Stumbling and Mumbling on 2013-02-02 13:39:27
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Cited by:
  1. Powdthavee, Nattavudh & Stutzer, Alois, 2014. "Economic Approaches to Understanding Change in Happiness," IZA Discussion Papers 8131, Institute for the Study of Labor (IZA).
  2. André Hajek, 2013. "Life Satisfaction and Unemployment: The Role of Voluntariness and Job Prospects," SOEPpapers on Multidisciplinary Panel Data Research 601, DIW Berlin, The German Socio-Economic Panel (SOEP).
  3. Powdthavee, Nattavudh, 2012. "Resilience to Economic Shocks and the Long Reach of Childhood Bullying," IZA Discussion Papers 6945, Institute for the Study of Labor (IZA).
  4. Nattavudh Powdthavee & James Vernoit, 2012. "The Transferable Scars: A Longitudinal Evidence of Psychological Impact of Past Parental Unemployment on Adolescents in the United Kingdom," CEP Discussion Papers dp1165, Centre for Economic Performance, LSE.
  5. Martin Binder & Alex Coad, 2014. "Heterogeneity in the Relationship between Unemployment and Subjective Well-Being: A Quantile Approach," Economics Working Paper Archive wp_808, Levy Economics Institute.

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