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New measures of the costs of unemployment: Evidence from the subjective well-being of 2.3 million Americans

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Author Info

  • Helliwell, John

    ()
    (University of British Columbia)

  • Huang, Haifang

    ()
    (University of Alberta, Department of Economics)

Abstract

By exploiting two very large samples of US subjective well-being data we are able to obtain comparable estimates of the monetary and other costs of unemployment on the unemployed themselves, while simultaneously estimating the effects of local employment on the subjective well-being of the rest of the population. For those who are unemployed, the subjective well-being consequences can be divided into income and non-income effects, with the latter being five times larger than the former. This is similar to what has been found in many countries, as is our finding that the non-income effects are lower for individuals living in areas of high unemployment. Most importantly, we are able to use the large sample size and variety of questions in the BRFSS and Gallup daily polls to reconcile, and extend to the United States, what had previously seemed to be contradictory results on the size and nature of the spillover effects of unemployment on subjective well-being. At the population level the spillover effects are twice as large as the direct effects, making the total well-being costs of unemployment fifteen times larger than those directly due to the lower incomes of the unemployed.

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Bibliographic Info

Paper provided by University of Alberta, Department of Economics in its series Working Papers with number 2011-3.

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Length: 57 pages
Date of creation: 24 Feb 2011
Date of revision:
Handle: RePEc:ris:albaec:2011_003

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Keywords: unemployment; well-being;

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  1. Justin Wolfers, 2003. "Is Business Cycle Volatility Costly? Evidence from Surveys of Subjective Wellbeing," NBER Working Papers 9619, National Bureau of Economic Research, Inc.
  2. Mavridis, Dimitris, 2010. "Can subjective well-being predict unemployment length ?," Policy Research Working Paper Series 5293, The World Bank.
  3. Andrew E. Clark & Paul Frijters & Michael A. Shields, 2008. "Relative Income, Happiness, and Utility: An Explanation for the Easterlin Paradox and Other Puzzles," Journal of Economic Literature, American Economic Association, American Economic Association, vol. 46(1), pages 95-144, March.
  4. Andreas Knabe & Steffen Rätzel, 2007. "Quantifying the psychological costs of unemployment: the role of permanent income," FEMM Working Papers 07012, Otto-von-Guericke University Magdeburg, Faculty of Economics and Management.
  5. Robert J. MacCulloch & Rafael Di Tella & Andrew J. Oswald, 2001. "Preferences over Inflation and Unemployment: Evidence from Surveys of Happiness," American Economic Review, American Economic Association, American Economic Association, vol. 91(1), pages 335-341, March.
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  1. FED STUDY: We Conservatively Estimate That The Financial Crisis Cost Us Up To $14 Trillion
    by Rob Wile in Business Insider on 2013-07-29 23:09:00
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Cited by:
  1. Isilda Mara & Michael Landesmann, 2013. "Do I stay because I am happy or am I happy because I stay? Life satisfaction in migration, and the decision to stay permanently, return and out-migrate," Norface Discussion Paper Series, Norface Research Programme on Migration, Department of Economics, University College London 2013008, Norface Research Programme on Migration, Department of Economics, University College London.
  2. Krauss, Alexander & Graham, Carol, 2013. "Subjective wellbeing in Colombia : some insights on vulnerability, job security, and relative incomes," Policy Research Working Paper Series 6672, The World Bank.
  3. Abel Brodeur & Sarah Flèche, 2013. "Where the Streets Have a Name: Income Comparisons in the US," PSE Working Papers, HAL halshs-00795198, HAL.
  4. repec:hal:wpaper:halshs-00795198 is not listed on IDEAS
  5. Timothy J. Bartik, 2014. "How Effects of Local Labor Demand Shocks Vary with Local Labor Market Conditions," Upjohn Working Papers and Journal Articles, W.E. Upjohn Institute for Employment Research 14-202, W.E. Upjohn Institute for Employment Research.
  6. Timothy J. Bartik, 2013. "Social Costs of Jobs Lost Due to Environmental Regulations," Upjohn Working Papers and Journal Articles, W.E. Upjohn Institute for Employment Research 13-193, W.E. Upjohn Institute for Employment Research.

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