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The social costs of unemployment: accounting for unemployment duration

  • Carsten Ochsen
  • Heinz Welsch

This article contributes to the literature on unemployment and well-being by investigating the linkage between personal life satisfaction and a macroeconomic indicator of the duration of unemployment. Using data for more than 50 000 individuals in 10 European countries, 1992-2002, we find that the social costs of unemployment, in terms of general unemployment's impact on life satisfaction, relate significantly and to a considerable extent to unemployment duration. It is thus not just the risk of becoming or staying unemployed that people worry about, but especially the prospect of staying long-term unemployed. This fear affects employed and unemployed people alike. Our findings provide a strong point for focusing labour market policies on long-term unemployment, in addition to considerations of human capital depreciation.

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File URL: http://www.tandfonline.com/doi/abs/10.1080/00036841003761900
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Article provided by Taylor & Francis Journals in its journal Applied Economics.

Volume (Year): 43 (2011)
Issue (Month): 27 ()
Pages: 3999-4005

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Handle: RePEc:taf:applec:v:43:y:2011:i:27:p:3999-4005
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  1. Carol Graham & Stefano Pettinato, 2001. "Happiness, Markets, and Democracy: Latin America in Comparative Perspective," Journal of Happiness Studies, Springer, vol. 2(3), pages 237-268, September.
  2. Bernard M. S. van Praag & Barbara E. Baarsma, 2005. "Using Happiness Surveys to Value Intangibles: The Case of Airport Noise," Economic Journal, Royal Economic Society, vol. 115(500), pages 224-246, 01.
  3. Bruno S. Frey & Alois Stutzer, 2002. "What Can Economists Learn from Happiness Research?," Journal of Economic Literature, American Economic Association, vol. 40(2), pages 402-435, June.
  4. Welsch, Heinz, 2002. "Preferences over Prosperity and Pollution: Environmental Valuation Based on Happiness Surveys," Kyklos, Wiley Blackwell, vol. 55(4), pages 473-94.
  5. Alberto Alesina & Rafael Di Tella & Robert MacCulloch, 2001. "Inequality and Happiness: Are Europeans and Americans Different?," NBER Working Papers 8198, National Bureau of Economic Research, Inc.
  6. Welsch, Heinz, 2006. "Environment and happiness: Valuation of air pollution using life satisfaction data," Ecological Economics, Elsevier, vol. 58(4), pages 801-813, July.
  7. Winkelmann, Liliana & Winkelmann, Rainer, 1998. "Why Are the Unemployed So Unhappy? Evidence from Panel Data," Economica, London School of Economics and Political Science, vol. 65(257), pages 1-15, February.
  8. 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.
  9. Heinz Welsch, 2003. "Freedom and Rationality as Predictors of Cross-National Happiness Patterns: The Role of Income as a Mediating Variable," Journal of Happiness Studies, Springer, vol. 4(3), pages 295-321, September.
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