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Boon or Bane? Others' Unemployment, Well-being and Job Insecurity

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Author Info
Clark, Andrew E. () (Paris School of Economics)
Knabe, Andreas () (Free University of Berlin)
Rätzel, Steffen () (University of Magdeburg)

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Abstract

The social norm of unemployment suggests that aggregate unemployment reduces the well-being of the employed, but has a far smaller effect on the unemployed. We use German panel data to reproduce this standard result, but then suggest that the appropriate distinction may not be between employment and unemployment, but rather between higher and lower levels of labour-market security, at least for men. Men with good job prospects, both employed and unemployed, are strongly negatively affected by regional unemployment. However, insecure employed men and poor-prospect unemployed men are less negatively, or even positively, affected. There is however no clear relationship for women. We analyse labour-market inequality and unemployment hysteresis in the light of our results.

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Publisher Info
Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 4210.

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Date of creation: Jun 2009
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Publication status: forthcoming in: Labour Economics
Handle: RePEc:iza:izadps:dp4210

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Related research
Keywords: job insecurity; externalities; unemployment; well-being;

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Find related papers by JEL classification:
I31 - Health, Education, and Welfare - - Welfare and Poverty - - - General Welfare
D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
J60 - Labor and Demographic Economics - - Mobility, Unemployment, and Vacancies - - - General

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References listed on IDEAS
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  1. David G. Blanchflower & Andrew J. Oswald, 2000. "Well-Being Over Time in Britain and the USA," NBER Working Papers 7487, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  2. Gerlach, Knut & Stephan, Gesine, 1996. "A paper on unhappiness and unemployment in Germany," Economics Letters, Elsevier, vol. 52(3), pages 325-330, September. [Downloadable!] (restricted)
  3. 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. [Downloadable!]
    Other versions:
  4. 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. [Downloadable!] (restricted)
  5. Rafael Di Tella & Robert J. MacCulloch & Andrew J. Oswald, 2001. "Preferences over Inflation and Unemployment: Evidence from Surveys of Happiness," American Economic Review, American Economic Association, vol. 91(1), pages 335-341, March. [Downloadable!] (restricted)
  6. Michael Shields & Stephen Wheatley Price & Mark Wooden, 2009. "Life satisfaction and the economic and social characteristics of neighbourhoods," Journal of Population Economics, Springer, vol. 22(2), pages 421-443, April. [Downloadable!] (restricted)
  7. Alois Stutzer & Rafael Lalive, 2004. "The Role of Social Work Norms in Job Searching and Subjective Well-Being," Journal of the European Economic Association, MIT Press, vol. 2(4), pages 696-719, 06. [Downloadable!] (restricted)
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  8. Luechinger, Simon & Meier, Stephan & Stutzer, Alois, 2008. "Why Does Unemployment Hurt the Employed? Evidence from the Life Satisfaction Gap between the Public and the Private Sector," IZA Discussion Papers 3385, Institute for the Study of Labor (IZA). [Downloadable!]
  9. Shields, Michael A. & Wheatley Price, Stephen, 2001. "Exploring the Economic and Social Determinants of Psychological and Psychosocial Health," IZA Discussion Papers 396, Institute for the Study of Labor (IZA). [Downloadable!]
  10. Andrew E. Clark & Nicolai Kristensen & Niels Westergård-Nielsen, 2007. "Job satisfaction and co-worker wages: Status or signal?," PSE Working Papers 2007-23, PSE (Ecole normale supérieure). [Downloadable!]
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  11. Clark, Andrew E & Oswald, Andrew J, 1994. "Unhappiness and Unemployment," Economic Journal, Royal Economic Society, vol. 104(424), pages 648-59, May. [Downloadable!] (restricted)
  12. Nattavudh Powdthavee, 2003. "Are there Regional Variations in the Psychological Cost of Unemployment in South Africa?," Labor and Demography 0310006, EconWPA, revised 28 Oct 2003. [Downloadable!]
  13. Andrew E. Clark & Fabien Postel-Vinay, 2004. "Job security and job protection," DELTA Working Papers 2004-16, DELTA (Ecole normale supérieure). [Downloadable!]
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  14. Ada Ferrer-i-Carbonell & Paul Frijters, 2004. "How Important is Methodology for the estimates of the determinants of Happiness?," Economic Journal, Royal Economic Society, vol. 114(497), pages 641-659, 07. [Downloadable!] (restricted)
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  15. Rosanna Scutella & Mark Wooden, 2006. "Effects of Household Joblessness on Subjective Well-Being," Melbourne Institute Working Paper Series wp2006n10, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne. [Downloadable!]
  16. Claudia Senik, . "When Information Dominates Comparison: A Panel Data Analysis Using Russian Subjective Data," William Davidson Institute Working Papers Series 495, William Davidson Institute at the University of Michigan Stephen M. Ross Business School. [Downloadable!]
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  17. Andrew E. Clark, 2009. "Work, Jobs and Well-Being across the Millennium," OECD Social, Employment and Migration Working Papers 83, OECD, Directorate for Employment, Labour and Social Affairs. [Downloadable!]
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  18. Moulton, Brent R, 1990. "An Illustration of a Pitfall in Estimating the Effects of Aggregate Variables on Micro Unit," The Review of Economics and Statistics, MIT Press, vol. 72(2), pages 334-38, May. [Downloadable!] (restricted)
  19. David G. Blanchflower, 2007. "Is Unemployment More Costly Than Inflation?," NBER Working Papers 13505, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  20. Bernard M.S. Van Praag, 2004. "The Connexion between Old and New Approaches to Financial Satisfaction," Tinbergen Institute Discussion Papers 04-053/3, Tinbergen Institute. [Downloadable!]
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