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Scarring: The Psychological Impact of Past Unemployment

Author

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  • Andrew Clark
  • Yannis Georgellis
  • Peter Sanfey

Abstract

This paper considers the psychological impact of past unemployment. Using 11 waves of German panel data, we show that life satisfaction is lower not only for the current unemployed (relative to the employed), but also for those with higher levels of past unemployment. However, the negative wellbeing effect of current unemployment is weaker for those who have been unemployed more often in the past. The panel data also reveal some evidence that those suffering greater falls in wellbeing on entering unemployment are less likely to remain unemployed one year later. Together, these findings offer a psychological explanation of persistent unemployment.

Suggested Citation

  • Andrew Clark & Yannis Georgellis & Peter Sanfey, 2001. "Scarring: The Psychological Impact of Past Unemployment," Economica, London School of Economics and Political Science, vol. 68(270), pages 221-241, May.
    • Handle: RePEc:bla:econom:v:68:y:2001:i:270:p:221-241
    DOI: 10.1111/1468-0335.00243
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    JEL classification:

    • D10 - Microeconomics - - Household Behavior - - - General
    • J28 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Safety; Job Satisfaction; Related Public Policy
    • J63 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Turnover; Vacancies; Layoffs

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