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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

Paper provided by Department of Economics, University of York in its series Discussion Papers with number 09/15.

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Handle: RePEc:yor:yorken:09/15

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Postal: Department of Economics and Related Studies, University of York, York, YO10 5DD, United Kingdom
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Fax: (0)1904 323759
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Web page: http://www.york.ac.uk/economics/
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Keywords: Domain satisfaction; Life satisfaction; Adaptation; Unemployment; Happiness;

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  1. Clark, Andrew E & Georgellis, Yannis & Sanfey, Peter, 2001. "Scarring: The Psychological Impact of Past Unemployment," Economica, London School of Economics and Political Science, vol. 68(270), pages 221-41, May.
  2. Andrew E. Clark, 2006. "A Note on Unhappiness and Unemployment Duration," Applied Economics Quarterly (formerly: Konjunkturpolitik), Duncker & Humblot, Berlin, vol. 52(4), pages 291-308.
  3. 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 F222-F243, 06.
  4. 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.
  5. Bruno S. Frey & Alois Stutzer, 2001. "What Can Economists Learn from Happiness Research?," CESifo Working Paper Series 503, CESifo Group Munich.
  6. Ada Ferrer-i-Carbonell & Bernard M.S. van Praag, 2002. "The subjective costs of health losses due to chronic diseases. An alternative model for monetary appraisal," Health Economics, John Wiley & Sons, Ltd., vol. 11(8), pages 709-722.
  7. N Powdthavee, 2008. "Ill-Health as a Household Norm: Evidence from Other People's Health Problems," Discussion Papers 08/21, Department of Economics, University of York.
  8. Bernard M.S. van Praag & P. Frijters & A. Ferrer-i-Carbonell, 2002. "The Anatomy of Subjective Well-being," Tinbergen Institute Discussion Papers 02-022/3, Tinbergen Institute.
  9. Ada Ferrer-i-Carbonell & Paul Frijters, 2002. "How important is Methodology for the Estimates of the Determinants of Happiness?," Tinbergen Institute Discussion Papers 02-024/3, Tinbergen Institute.
  10. 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, vol. 91(1), pages 335-341, March.
  11. Clark, Andrew E & Oswald, Andrew J, 1994. "Unhappiness and Unemployment," Economic Journal, Royal Economic Society, vol. 104(424), pages 648-59, May.
  12. Oswald, Andrew J. & Powdthavee, Nattavudh, 2008. "Does happiness adapt? A longitudinal study of disability with implications for economists and judges," Journal of Public Economics, Elsevier, vol. 92(5-6), pages 1061-1077, June.
  13. 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.
  14. Geeta Kingdon & John Knight, 2004. "Unemployment in South Africa: the nature of the beast," Labor and Demography 0409003, EconWPA.
  15. William A. Darity & Arthur H. Goldsmith, 1996. "Social Psychology, Unemployment and Macroeconomics," Journal of Economic Perspectives, American Economic Association, vol. 10(1), pages 121-140, Winter.
  16. Oswald, Andrew J. & Powdthavee, Nattavudh, 2007. "Death, Happiness, and the Calculation of Compensatory Damages," The Warwick Economics Research Paper Series (TWERPS) 827, University of Warwick, Department of Economics.
  17. 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.
  18. Bruno S. Frey & Alois Stutzer, . "Happiness, Economy and Institutions," IEW - Working Papers 015, Institute for Empirical Research in Economics - University of Zurich.
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  20. Frijters, Paul & Johnston, David W. & Shields, Michael A., 2008. "Happiness Dynamics with Quarterly Life Event Data," IZA Discussion Papers 3604, Institute for the Study of Labor (IZA).
  21. Korpi, Tomas, 1997. "Is utility related to employment status? Employment, unemployment, labor market policies and subjective well-being among Swedish youth," Labour Economics, Elsevier, vol. 4(2), pages 125-147, June.
  22. repec:hal:wpaper:halshs-00590444 is not listed on IDEAS
  23. Nattavudh Powdthavee, 2010. "How much does money really matter? Estimating the causal effects of income on happiness," Empirical Economics, Springer, vol. 39(1), pages 77-92, August.
  24. Nattavudh Powdthavee, 2007. "Are there Geographical Variations in the Psychological Cost of Unemployment in South Africa?," Social Indicators Research, Springer, vol. 80(3), pages 629-652, February.
  25. Gerlach, Knut & Stephan, Gesine, 1996. "A paper on unhappiness and unemployment in Germany," Economics Letters, Elsevier, vol. 52(3), pages 325-330, September.
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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, 2012. "Resilience to Economic Shocks and the Long Reach of Childhood Bullying," IZA Discussion Papers 6945, 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 & Stutzer, Alois, 2014. "Economic Approaches to Understanding Change in Happiness," IZA Discussion Papers 8131, 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.

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