Unemployment as a Social Norm: Psychological Evidence from Panel Data
This article uses seven waves of panel data to test for social norms in labor market status. The unemployed's well-being is shown to be strongly positively correlated with reference group unemployment (at the regional, partner, or household level). This result, far stronger for men, is robust to controls for unobserved individual heterogeneity. Panel data also show that those whose well-being fell the most on entering unemployment are less likely to remain unemployed. These findings suggest a psychological explanation of both unemployment polarization and hysteresis, based on the utility effects of a changing employment norm in the reference group.
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- Milton Friedman, 1957. "Introduction to "A Theory of the Consumption Function"," NBER Chapters, in: A Theory of the Consumption Function, pages 1-6 National Bureau of Economic Research, Inc.
- Paul Beaudry & David A. Green, 2000.
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- Milton Friedman, 1957. "A Theory of the Consumption Function," NBER Books, National Bureau of Economic Research, Inc, number frie57-1.
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