IDEAS home Printed from https://ideas.repec.org/p/auu/dpaper/492.html
   My bibliography  Save this paper

Unemployment and Psychological Well-Being

Author

Listed:
  • Nick Carroll

Abstract

Who records the largest drops in life satisfaction when they move into unemployment? Do men experience a larger drop in life satisfaction than women? Do Australians and Americans record a larger drop than Europeans? Using an Australian panel data-set (the Household Income and Labour Dynamics Survey of Australia), this paper finds that the unemployed in Australia report lower life satisfaction than observationally equivalent employed people (holding current income constant). Being currently unemployed is estimated to be equivalent to the loss of $42,100 annual income for men and $86,300 annual income for women. Thus, the drop in life satisfaction, after controlling for unobserved time invariant characteristics, associated with unemployment is larger for women than men. The impact of unemployment on life satisfaction is large compared to the drops in life satisfaction associated with changes in income and disability status. It is found that unemployment is less painful for men in Australia than for men in Germany and the United Kingdom. The paper hypothesises that the large fall in life satisfaction may be the result of a drop in life-time earnings, as well as a ‘psychological’ effect.

Suggested Citation

  • Nick Carroll, 2005. "Unemployment and Psychological Well-Being," CEPR Discussion Papers 492, Centre for Economic Policy Research, Research School of Economics, Australian National University.
    • Handle: RePEc:auu:dpaper:492
    as

    Download full text from publisher

    File URL: https://www.cbe.anu.edu.au/researchpapers/CEPR/DP492.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Alfred Michael Dockery, 2005. "The Happiness of Young Australians: Empirical Evidence on the Role of Labour Market Experience," The Economic Record, The Economic Society of Australia, vol. 81(255), pages 322-335, December.
    2. Blanchflower, David G. & Oswald, Andrew J., 2004. "Well-being over time in Britain and the USA," Journal of Public Economics, Elsevier, vol. 88(7-8), pages 1359-1386, July.
    3. Gary Marks & Nicole Fleming, 1999. "Influences and Consequences of Well-being Among Australian Young People: 1980–1995," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 46(3), pages 301-323, March.
    4. 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.
    5. 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.
    6. repec:bla:econom:v:68:y:2001:i:270:p:221-41 is not listed on IDEAS
    7. Gary Chamberlain, 1980. "Analysis of Covariance with Qualitative Data," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 47(1), pages 225-238.
    8. George A. Akerlof, 1980. "A Theory of Social Custom, of which Unemployment may be One Consequence," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 94(4), pages 749-775.
    9. Ada Ferrer-i-Carbonell & Paul Frijters, 2004. "How Important is Methodology for the estimates of the determinants of Happiness?," Economic Journal, Royal Economic Society, vol. 114(497), pages 641-659, July.
    10. 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.
    11. Paul Frijters & John P. Haisken-DeNew & Michael A. Shields, 2004. "Money Does Matter! Evidence from Increasing Real Income and Life Satisfaction in East Germany Following Reunification," American Economic Review, American Economic Association, vol. 94(3), pages 730-740, June.
    12. Rabe-Hesketh, Sophia & Skrondal, Anders & Pickles, Andrew, 2005. "Maximum likelihood estimation of limited and discrete dependent variable models with nested random effects," Journal of Econometrics, Elsevier, vol. 128(2), pages 301-323, October.
    13. Christopher A. Pissarides, 1992. "Loss of Skill During Unemployment and the Persistence of Employment Shocks," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 107(4), pages 1371-1391.
    14. Arulampalam, Wiji, 2001. "Is Unemployment Really Scarring? Effects of Unemployment Experiences on Wages," Economic Journal, Royal Economic Society, vol. 111(475), pages 585-606, November.
    15. Goldsmith, Arthur H. & Veum, Jonathan R. & William Darity, Jr., 1996. "The impact of labor force history on self-esteem and its component parts, anxiety, alienation and depression," Journal of Economic Psychology, Elsevier, vol. 17(2), pages 183-220, April.
    16. Liliana Winkelmann & Rainer Winkelmann, 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.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Suppa, Nicolai, 2021. "Unemployment and subjective well-being," GLO Discussion Paper Series 760, Global Labor Organization (GLO).
    2. Sonja C. Kassenboehmer & John P. Haisken-DeNew, 2008. "You’re Fired! The Causal Negative Effect of Unemployment on Life Satisfaction," Ruhr Economic Papers 0063, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.
    3. Kassenböhmer, Sonja C. & Haisken-DeNew, John P., 2008. "You're Fired! The Causal Negative Effect of Unemployment on Life Satisfaction," Ruhr Economic Papers 63, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.
    4. repec:zbw:rwirep:0063 is not listed on IDEAS
    5. Andreas Knabe & Steffen Rätzel, 2011. "Scarring or Scaring? The Psychological Impact of Past Unemployment and Future Unemployment Risk," Economica, London School of Economics and Political Science, vol. 78(310), pages 283-293, April.
    6. Z. Bilgen Susanlı, 2018. "Life satisfaction and unemployment in Turkey: evidence from Life Satisfaction Surveys 2004–2013," Quality & Quantity: International Journal of Methodology, Springer, vol. 52(1), pages 479-499, January.
    7. Sonja C. Kassenboehmer & John P. Haisken‐DeNew, 2009. "You're Fired! The Causal Negative Effect of Entry Unemployment on Life Satisfaction," Economic Journal, Royal Economic Society, vol. 119(536), pages 448-462, March.
    8. Kunze, Lars & Suppa, Nicolai, 2017. "Bowling alone or bowling at all? The effect of unemployment on social participation," Journal of Economic Behavior & Organization, Elsevier, vol. 133(C), pages 213-235.
    9. Lars Kunze & Nicolai Suppa, 2014. "Bowling Alone or Bowling at All? The Effect of Unemployment on Social Participation," Ruhr Economic Papers 0510, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.
    10. Stavrova, Olga & Schlösser, Thomas & Fetchenhauer, Detlef, 2011. "Are the unemployed equally unhappy all around the world? The role of the social norms to work and welfare state provision in 28 OECD countries," Journal of Economic Psychology, Elsevier, vol. 32(1), pages 159-171, February.
    11. Krause-Pilatus, Annabelle, 2011. "Work to Live or Live to Work? Unemployment, Happiness, and Culture," IZA Discussion Papers 6101, Institute of Labor Economics (IZA).
    12. Böhnke, Petra & Kohler, Ulrich, 2008. "Well-being and inequality," Discussion Papers, Research Unit: Inequality and Social Integration SP I 2008-201, WZB Berlin Social Science Center.
    13. repec:zbw:rwirep:0510 is not listed on IDEAS
    14. Shivani Taneja, 2019. "Gender Gap In Job Utility Of British Workers," Proceedings of International Academic Conferences 9010643, International Institute of Social and Economic Sciences.
    15. Antje Mertens & Miriam Beblo, 2016. "Self-Reported Satisfaction and the Economic Crisis of 2007–2010: Or How People in the UK and Germany Perceive a Severe Cyclical Downturn," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 125(2), pages 537-565, January.
    16. John P. Haisken-DeNew & Mathias Sinning, 2007. "Social Deprivation and Exclusion of Immigrants in Germany," Ruhr Economic Papers 0031, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.
    17. de New, John & Sinning, Mathias, 2007. "Social Deprivation and Exclusion of Immigrants in Germany," IZA Discussion Papers 3153, Institute of Labor Economics (IZA).
    18. Krause, Annabelle, 2013. "Don’t worry, be happy? Happiness and reemployment," Journal of Economic Behavior & Organization, Elsevier, vol. 96(C), pages 1-20.
    19. repec:zbw:rwirep:0117 is not listed on IDEAS
    20. Nattavudh Powdthavee, 2012. "Jobless, Friendless and Broke: What Happens to Different Areas of Life Before and After Unemployment?," Economica, London School of Economics and Political Science, vol. 79(315), pages 557-575, July.
    21. Aguilar, Alexandra Cortés & García Muñoz, Teresa M. & Moro-Egido, Ana I., 2013. "Heterogeneous self-employment and satisfaction in Latin America," Journal of Economic Psychology, Elsevier, vol. 39(C), pages 44-61.
    22. Sonja C. Kassenboehmer & John P. Haisken-DeNew, 2009. "Social Jealousy and Stigma: Negative Externalities of Social Assistance Payments in Germany," Ruhr Economic Papers 0117, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.
    23. Christian Bayer & Falko Juessen, 2015. "Happiness and the Persistence of Income Shocks," American Economic Journal: Macroeconomics, American Economic Association, vol. 7(4), pages 160-187, October.

    More about this item

    Keywords

    well-being; happiness; unemployment;
    All these keywords.

    JEL classification:

    • I31 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - General Welfare, Well-Being
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:auu:dpaper:492. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: the person in charge (email available below). General contact details of provider: https://edirc.repec.org/data/cpanuau.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.