IDEAS home Printed from https://ideas.repec.org/a/bla/kyklos/v73y2020i4p568-604.html
   My bibliography  Save this article

Life Satisfaction and Noncognitive Skills: Effects on the Likelihood of Unemployment

Author

Listed:
  • Kelsey J. O'Connor

Abstract

Psychological measures are gaining recognition as important determinants of labor performance. This paper demonstrates that people reporting greater subjective well‐being (SWB) are causally less likely to be unemployed in the future. The relation exhibits a meaningful magnitude relative to the mean unemployment rate and other determinants. The analysis is based on a longitudinal survey of German households over the period 1996‐2013 (German Socio‐Economic Panel). Analyses include separate dynamic and fixed‐effects regressions, and two instrumental variable approaches. Together, this sample and set of analyses, makes it possible to assess the relation for previously unstudied groups and to assess different mechanisms. Indeed the relation exhibits considerable heterogeneity. It is quadratic and substantially greater for students and people that are presently unemployed (compared to their counterparts). Fixed effects regressions indicate that SWB affects future unemployment in part through within‐person changes in the Big‐Five personality traits (e.g., conscientiousness or emotional stability) but not cognitive ability. The results imply SWB may be used as a proxy for alternative psychological predictors of performance, which is important because SWB is more broadly available than many alternatives (e.g., the Big Five). What is more, policy makers have additional reasons to promote SWB.

Suggested Citation

  • Kelsey J. O'Connor, 2020. "Life Satisfaction and Noncognitive Skills: Effects on the Likelihood of Unemployment," Kyklos, Wiley Blackwell, vol. 73(4), pages 568-604, November.
    • Handle: RePEc:bla:kyklos:v:73:y:2020:i:4:p:568-604
    DOI: 10.1111/kykl.12226
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/kykl.12226
    Download Restriction: no
    File URL: https://libkey.io/10.1111/kykl.12226?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Arthur Lewbel, 2012. "Using Heteroscedasticity to Identify and Estimate Mismeasured and Endogenous Regressor Models," Journal of Business & Economic Statistics, Taylor & Francis Journals, vol. 30(1), pages 67-80.
    2. Andrew E. Clark, 2003. "Unemployment as a Social Norm: Psychological Evidence from Panel Data," Journal of Labor Economics, University of Chicago Press, vol. 21(2), pages 289-322, April.
    3. Ed Diener, 2006. "Guidelines for National Indicators of Subjective Well-Being and Ill-Being," Journal of Happiness Studies, Springer, vol. 7(4), pages 397-404, November.
    4. De Neve, Jan-Emmanuel & Oswald, Andrew J., 2012. "Estimating the influence of life satisfaction and positive affect on later income using sibling fixed-effects," LSE Research Online Documents on Economics 51523, London School of Economics and Political Science, LSE Library.
    5. Ashenfelter, Orley C, 1978. "Estimating the Effect of Training Programs on Earnings," The Review of Economics and Statistics, MIT Press, vol. 60(1), pages 47-57, February.
    6. Andrew E. Clark & Ed Diener & Yannis Georgellis & Richard E. Lucas, 2008. "Lags And Leads in Life Satisfaction: a Test of the Baseline Hypothesis," Economic Journal, Royal Economic Society, vol. 118(529), pages 222-243, June.
    7. Charles Henri DiMaria & Chiara Peroni & Francesco Sarracino, 2020. "Happiness Matters: Productivity Gains from Subjective Well-Being," Journal of Happiness Studies, Springer, vol. 21(1), pages 139-160, January.
    8. Andrew E. Clark, 2018. "Four Decades of the Economics of Happiness: Where Next?," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 64(2), pages 245-269, June.
    9. Bottan, Nicolas Luis & Perez Truglia, Ricardo, 2011. "Deconstructing the hedonic treadmill: Is happiness autoregressive?," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 40(3), pages 224-236, May.
    10. Jacob A. Mincer, 1974. "Introduction to "Schooling, Experience, and Earnings"," NBER Chapters, in: Schooling, Experience, and Earnings, pages 1-4, National Bureau of Economic Research, Inc.
    11. Bartolini, Stefano & Sarracino, Francesco, 2014. "Happy for how long? How social capital and economic growth relate to happiness over time," Ecological Economics, Elsevier, vol. 108(C), pages 242-256.
    12. Jeffrey M Wooldridge, 2010. "Econometric Analysis of Cross Section and Panel Data," MIT Press Books, The MIT Press, edition 2, volume 1, number 0262232588, December.
    13. Denny, Kevin & Oppedisano, Veruska, 2013. "The surprising effect of larger class sizes: Evidence using two identification strategies," Labour Economics, Elsevier, vol. 23(C), pages 57-65.
    14. Robert Cummins & Helen Nistico, 2002. "Maintaining Life Satisfaction: The Role of Positive Cognitive Bias," Journal of Happiness Studies, Springer, vol. 3(1), pages 37-69, March.
    15. Sarah Flèche & Richard Layard, 2017. "Do More of Those in Misery Suffer from Poverty, Unemployment or Mental Illness?," Kyklos, Wiley Blackwell, vol. 70(1), pages 27-41, February.
    16. Andrea Bassanini & Romain Duval, 2007. "The determinants of unemployment across OECD countries: Reassessing the role of policies and institutions," OECD Economic Studies, OECD Publishing, vol. 2006(1), pages 7-86.
    17. Joshua D. Angrist & Jörn-Steffen Pischke, 2009. "Mostly Harmless Econometrics: An Empiricist's Companion," Economics Books, Princeton University Press, edition 1, number 8769.
    18. Paul Anand & Ambra Poggi, 2018. "Do Social Resources Matter? Social Capital, Personality Traits, and the Ability to Plan Ahead," Kyklos, Wiley Blackwell, vol. 71(3), pages 343-373, August.
    19. Edmans, Alex, 2011. "Does the stock market fully value intangibles? Employee satisfaction and equity prices," Journal of Financial Economics, Elsevier, vol. 101(3), pages 621-640, September.
    20. Jacob A. Mincer, 1974. "Schooling, Experience, and Earnings," NBER Books, National Bureau of Economic Research, Inc, number minc74-1, May.
    21. Graham, Carol & Eggers, Andrew & Sukhtankar, Sandip, 2004. "Does happiness pay?: An exploration based on panel data from Russia," Journal of Economic Behavior & Organization, Elsevier, vol. 55(3), pages 319-342, November.
    22. Guven, Cahit, 2012. "Reversing the question: Does happiness affect consumption and savings behavior?," Journal of Economic Psychology, Elsevier, vol. 33(4), pages 701-717.
    23. Christopher F Baum & Arthur Lewbel & Mark E Schaffer & Oleksander Talavera, 2012. "Instrumental variables estimation using heteroskedasticity-based instruments," United Kingdom Stata Users' Group Meetings 2012 07, Stata Users Group.
    24. Dusanee Kesavayuth & Vasileios Zikos, 2018. "Happy People Are Less Likely To Be Unemployed: Psychological Evidence From Panel Data," Contemporary Economic Policy, Western Economic Association International, vol. 36(2), pages 277-291, April.
    25. Bas ter Weel, 2008. "The Noncognitive Determinants of Labor Market and Behavioral Outcomes: Introduction to the Symposium," Journal of Human Resources, University of Wisconsin Press, vol. 43(4).
    26. Clark, Andrew E., 2001. "What really matters in a job? Hedonic measurement using quit data," Labour Economics, Elsevier, vol. 8(2), pages 223-242, May.
    27. Mohanty, Madhu S., 2009. "Effects of positive attitude on earnings: Evidence from the US longitudinal data," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 38(2), pages 357-371, March.
    28. James Heckman & Tim Kautz, 2013. "Fostering and Measuring Skills: Interventions That Improve Character and Cognition," Working Papers 2013-019, Human Capital and Economic Opportunity Working Group.
    29. Mavridis, Dimitris, 2010. "Can subjective well-being predict unemployment length ?," Policy Research Working Paper Series 5293, The World Bank.
    30. Efstratia Arampatzi & Martijn Burger & Elena Ianchovichina & Tina Röhricht & Ruut Veenhoven, 2018. "Unhappy Development: Dissatisfaction With Life on the Eve of the Arab Spring," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 64(s1), pages 80-113, October.
    31. Heineck, Guido & Anger, Silke, 2010. "The returns to cognitive abilities and personality traits in Germany," Labour Economics, Elsevier, vol. 17(3), pages 535-546, June.
    32. Francesco Sarracino & Luca Fumarco, 2020. "Assessing the Non-financial Outcomes of Social Enterprises in Luxembourg," Journal of Business Ethics, Springer, vol. 165(3), pages 425-451, September.
    33. Nickell, Stephen J, 1981. "Biases in Dynamic Models with Fixed Effects," Econometrica, Econometric Society, vol. 49(6), pages 1417-1426, November.
    34. Jule Specht & Boris Egloff & Stefan C. Schmukle, 2012. "Examining Mechanisms of Personality Maturation: The Impact of Life Satisfaction on the Development of Big Five Personality Traits," SOEPpapers on Multidisciplinary Panel Data Research 455, DIW Berlin, The German Socio-Economic Panel (SOEP).
    35. O'Connor, Kelsey J. & Graham, Carol, 2019. "Longer, more optimistic, lives: Historic optimism and life expectancy in the United States," Journal of Economic Behavior & Organization, Elsevier, vol. 168(C), pages 374-392.
    36. Sendhil Mullainathan & Marianne Bertrand, 2001. "Do People Mean What They Say? Implications for Subjective Survey Data," American Economic Review, American Economic Association, vol. 91(2), pages 67-72, May.
    37. Mohanty, Madhu S., 2009. "Effects of positive attitude on happiness and wage: Evidence from the US data," Journal of Economic Psychology, Elsevier, vol. 30(6), pages 884-897, December.
    38. Jacob A. Mincer, 1974. "Schooling and Earnings," NBER Chapters, in: Schooling, Experience, and Earnings, pages 41-63, National Bureau of Economic Research, Inc.
    39. Mohanty, Madhu S. & Ullah, Aman, 2012. "Direct and indirect effects of happiness on wage: A simultaneous equations approach," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 41(2), pages 143-152.
    40. Gert G. Wagner & Joachim R. Frick & Jürgen Schupp, 2007. "The German Socio-Economic Panel Study (SOEP) – Scope, Evolution and Enhancements," Schmollers Jahrbuch : Journal of Applied Social Science Studies / Zeitschrift für Wirtschafts- und Sozialwissenschaften, Duncker & Humblot, Berlin, vol. 127(1), pages 139-169.
    41. Andrea Bassanini & Romain Duval, 2006. "The Determinants of Unemployment across OECD Countries," Post-Print halshs-00120584, HAL.
    42. Manuel Arellano & Stephen Bond, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 58(2), pages 277-297.
    43. Gerrit Mueller & Erik Plug, 2006. "Estimating the Effect of Personality on Male and Female Earnings," ILR Review, Cornell University, ILR School, vol. 60(1), pages 3-22, October.
    44. Le Moglie, Marco & Mencarini, Letizia & Rapallini, Chiara, 2015. "Is it just a matter of personality? On the role of subjective well-being in childbearing behavior," Journal of Economic Behavior & Organization, Elsevier, vol. 117(C), pages 453-475.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Lepinteur, Anthony & Clark, Andrew E. & Ferrer-i-Carbonell, Ada & Piper, Alan & Schröder, Carsten & D'Ambrosio, Conchita, 2022. "Gender, loneliness and happiness during COVID-19," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 101(C).
    2. Yang, Liyuan & Zikos, Vasileios, 2023. "Mental health and smoking behavior," Economic Modelling, Elsevier, vol. 126(C).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. O'Connor, Kelsey J., 2020. "The effect of immigration on natives’ well-being in the European Union," Journal of Economic Behavior & Organization, Elsevier, vol. 180(C), pages 257-274.
    2. Bartolini, Stefano & O’Connor, Kelsey J., 2022. "Effects of teaching practices on life satisfaction and test scores: evidence from the Program for International Student Assessment (PISA)," GLO Discussion Paper Series 1009, Global Labor Organization (GLO).
    3. O'Connor, Kelsey J. & Graham, Carol, 2019. "Longer, more optimistic, lives: Historic optimism and life expectancy in the United States," Journal of Economic Behavior & Organization, Elsevier, vol. 168(C), pages 374-392.
    4. Robson Morgan & Kelsey J. O’Connor, 2022. "Labor Market Policy and Subjective Well-Being During the Great Recession," Journal of Happiness Studies, Springer, vol. 23(2), pages 391-422, February.
    5. Marcin Piekałkiewicz, 2017. "Why do economists study happiness?," The Economic and Labour Relations Review, , vol. 28(3), pages 361-377, September.
    6. Krause, Annabelle, 2013. "Don’t worry, be happy? Happiness and reemployment," Journal of Economic Behavior & Organization, Elsevier, vol. 96(C), pages 1-20.
    7. Anne C. Gielen & Jan C. Ours, 2014. "Unhappiness and Job Finding," Economica, London School of Economics and Political Science, vol. 81(323), pages 544-565, July.
    8. Christina Boll & Andreas Lagemann, 2018. "Does Culture Trump Money? Employment and Childcare Use of Migrant and Non-Migrant Mothers of Pre-School Children in Germany," SOEPpapers on Multidisciplinary Panel Data Research 1015, DIW Berlin, The German Socio-Economic Panel (SOEP).
    9. Katrin John & Stephan Thomsen, 2014. "Heterogeneous returns to personality: the role of occupational choice," Empirical Economics, Springer, vol. 47(2), pages 553-592, September.
    10. Mohanty, Madhu S., 2009. "Effects of positive attitude on happiness and wage: Evidence from the US data," Journal of Economic Psychology, Elsevier, vol. 30(6), pages 884-897, December.
    11. Martijn Burger & Martijn Hendriks & Elena Ianchovichina, 2022. "Happy but Unequal: Differences in Subjective Well-Being across Individuals and Space in Colombia," Applied Research in Quality of Life, Springer;International Society for Quality-of-Life Studies, vol. 17(3), pages 1343-1387, June.
    12. Andrew E. Clark, 2015. "SWB as a Measure of Individual Well-Being," Working Papers halshs-01134483, HAL.
    13. Budría, Santiago & Ferrer-i-Carbonell, Ada, 2012. "Income Comparisons and Non-Cognitive Skills," IZA Discussion Papers 6419, Institute of Labor Economics (IZA).
    14. Andrew M. Jones & Audrey Laporte & Nigel Rice & Eugenio Zucchelli, 2019. "Dynamic panel data estimation of an integrated Grossman and Becker–Murphy model of health and addiction," Empirical Economics, Springer, vol. 56(2), pages 703-733, February.
    15. Vasilakis, Chrysovalantis, 2013. "Globalized Market for Talents and Inequality: What Can Be Learnt from European Football?," Economic Research Papers 270425, University of Warwick - Department of Economics.
    16. Fossen, Frank M. & Büttner, Tobias J.M., 2013. "The returns to education for opportunity entrepreneurs, necessity entrepreneurs, and paid employees," Economics of Education Review, Elsevier, vol. 37(C), pages 66-84.
    17. Cristina Bernini & Silvia Emili & Federica Galli, 2021. "Does urbanization matter in the expenditure‐happiness nexus?," Papers in Regional Science, Wiley Blackwell, vol. 100(6), pages 1403-1428, December.
    18. Ubaldi, Michele & Picchio, Matteo, 2023. "Intergenerational scars: The impact of parental unemployment on individual health later in life," GLO Discussion Paper Series 1271, Global Labor Organization (GLO).
    19. Ferreira, Maria & de Grip, Andries & van der Velden, Rolf, 2018. "Does informal learning at work differ between temporary and permanent workers? Evidence from 20 OECD countries," Labour Economics, Elsevier, vol. 55(C), pages 18-40.
    20. Gensowski, Miriam, 2018. "Personality, IQ, and lifetime earnings," Labour Economics, Elsevier, vol. 51(C), pages 170-183.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:kyklos:v:73:y:2020:i:4:p:568-604. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: http://www.blackwellpublishing.com/journal.asp?ref=0023-5962 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.