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Boon or Bane? Others' Unemployment, Well-being and Job Insecurity

  • Andrew Clark
  • Andreas Knabe
  • Steffen Rätzel

The social norm of unemployment suggests that aggregate unemployment reduces the well-being of the employed, but has a far smaller effect on the unemployed. We use German panel data to reproduce this standard result, but then suggest that the appropriate distinction may not be between employment and unemployment, but rather between higher and lower levels of labour-market security. Those with good job prospects, both employed and unemployed, are strongly negatively affected by regional unemployment. However, the insecure employed and the poor-prospect unemployed are less negatively, or even positively, affected. We use our results to analyse labour-market inequality and unemployment hysteresis.

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Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 2501.

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Date of creation: 2008
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Handle: RePEc:ces:ceswps:_2501
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  1. Andrew Clark & Fabien Postel-Vinay, 2005. "Job Security and Job Protection," CEP Discussion Papers dp0678, Centre for Economic Performance, LSE.
  2. Clark, Andrew E. & Kristensen, Nicolai & Westergård-Nielsen, Niels C., 2007. "Job Satisfaction and Co-worker Wages: Status or Signal?," IZA Discussion Papers 3073, Institute for the Study of Labor (IZA).
  3. Clark, Andrew E., 2009. "Work, Jobs And Well-Being Across the Millennium," CEPREMAP Working Papers (Docweb) 0901, CEPREMAP.
  4. Alois Stutzer & Rafael Lalive, . "The Role of Social Work Norms in Job Searching and Subjective Well-Being," IEW - Working Papers 051, Institute for Empirical Research in Economics - University of Zurich.
  5. DiTella, Rafael & MacCulloch, Robert & Oswald, Andrew J., 2001. "Preferences over inflation and unemployment: Evidence from surveys of happiness," ZEI Working Papers B 03-2001, ZEI - Center for European Integration Studies, University of Bonn.
  6. 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.
  7. repec:dgr:uvatin:20040053 is not listed on IDEAS
  8. Andrew Clark, 2001. "Unemployment As A Social Norm: Psychological Evidence from Panel Data," DELTA Working Papers 2001-17, DELTA (Ecole normale supérieure).
  9. Moulton, Brent R, 1990. "An Illustration of a Pitfall in Estimating the Effects of Aggregate Variables on Micro Unit," The Review of Economics and Statistics, MIT Press, vol. 72(2), pages 334-38, May.
  10. Clark, Andrew E & Oswald, Andrew J, 1994. "Unhappiness and Unemployment," Economic Journal, Royal Economic Society, vol. 104(424), pages 648-59, May.
  11. Platt, Stephen & Micciolo, Rocco & Tansella, Michele, 1992. "Suicide and unemployment in Italy: Description, analysis and interpretation of recent trends," Social Science & Medicine, Elsevier, vol. 34(11), pages 1191-1201, June.
  12. 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.
  13. David G. Blanchflower, 2007. "Is Unemployment More Costly Than Inflation?," NBER Working Papers 13505, National Bureau of Economic Research, Inc.
  14. Simon Luechinger & Stephan Meier & Alois Stutzer, 2008. "Why Does Unemployment Hurt the Employed? Evidence from the Life Satisfaction Gap between the Public and the Private Sector," Working papers 2008/02, Faculty of Business and Economics - University of Basel.
  15. Nattavudh Powdthavee, 2003. "Are there Regional Variations in the Psychological Cost of Unemployment in South Africa?," Labor and Demography 0310006, EconWPA, revised 28 Oct 2003.
  16. 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, 07.
  17. 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.
  18. 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, 04.
  19. Shields, Michael A. & Wheatley Price, Stephen, 2001. "Exploring the Economic and Social Determinants of Psychological and Psychosocial Health," IZA Discussion Papers 396, Institute for the Study of Labor (IZA).
  20. Claudia Senik, 2002. "When Information Dominates Comparison. A Panel Data Analysis Using Russian Subjective Data," DELTA Working Papers 2002-02, DELTA (Ecole normale supérieure).
  21. Michael Shields & Stephen Wheatley Price & Mark Wooden, 2009. "Life satisfaction and the economic and social characteristics of neighbourhoods," Journal of Population Economics, Springer, vol. 22(2), pages 421-443, April.
  22. 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.
  23. Gerlach, Knut & Stephan, Gesine, 1996. "A paper on unhappiness and unemployment in Germany," Economics Letters, Elsevier, vol. 52(3), pages 325-330, September.
  24. Rosanna Scutella & Mark Wooden, 2006. "Effects of Household Joblessness on Subjective Well-Being," Melbourne Institute Working Paper Series wp2006n10, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne.
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