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Changing Identity: Retiring from Unemployment

  • Clemens Hetschko
  • Andreas Knabe
  • Ronnie Schöb

Using data from the German Socio-Economic Panel from 1984-2009, we follow persons from their working life into their retirement years and find that, on average, employed people maintain their life satisfaction upon retirement, while long-term unemployed people report a substantial increase in their life satisfaction when they retire. These results are robust to controlling for changes in other life circumstances and suggest that retiring is associated with a switch in the relevant social norms that causes an increase in identity utility for the formerly unemployed. This is supportive of the idea that, by including identity in the utility function, results from the empirical life satisfaction literature can be reconciled with the economic theory of individual utility.

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File URL: http://www.cesifo-group.de/portal/page/portal/DocBase_Content/WP/WP-CESifo_Working_Papers/wp-cesifo-2011/wp-cesifo-2011-07/cesifo1_wp3540.pdf
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Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 3540.

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Date of creation: 2011
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Handle: RePEc:ces:ceswps:_3540
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  1. Richard E. Lucas & Andrew Clark & Yannis Georgellis & Ed Diener, 2002. "Unemployment Alters the Set-Point for Life Satisfaction," DELTA Working Papers 2002-17, DELTA (Ecole normale supérieure).
  2. 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).
  3. Andrew Clark & Andreas Knabe & Steffen Rätzel, 2008. "Boon or Bane? Others' Unemployment, Well-being and Job Insecurity," CESifo Working Paper Series 2501, CESifo Group Munich.
  4. Andreas Knabe & Steffen Rätzel, 2008. "Scarring or Scaring? The Psychological Impact of Past Unemployment and Future Unemployment Risk," FEMM Working Papers 08013, Otto-von-Guericke University Magdeburg, Faculty of Economics and Management.
  5. Andrew E. Clark & Yarine Fawaz, 2009. "Valuing jobs via retirement: European evidence," PSE Working Papers halshs-00566855, HAL.
  6. Michael A. Shields & Stephen Wheatley Price, 2005. "Exploring the economic and social determinants of psychological well-being and perceived social support in England," Journal of the Royal Statistical Society Series A, Royal Statistical Society, vol. 168(3), pages 513-537.
  7. Andrew E. Clark & Yarine Fawaz, 2009. "Valuing Jobs Via Retirement: European Evidence," National Institute Economic Review, National Institute of Economic and Social Research, vol. 209(1), pages 88-103, July.
  8. 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.
  9. Andrew E. Clark, 2006. "A note on unhappiness and unemployment duration," PSE Working Papers halshs-00590444, HAL.
  10. Clark, Andrew E. & Frijters, Paul & Shields, Michael A., 2007. "Relative Income, Happiness and Utility: An Explanation for the Easterlin Paradox and Other Puzzles," IZA Discussion Papers 2840, Institute for the Study of Labor (IZA).
  11. Clark, Andrew E. & Diener, Ed & Georgellis, Yannis & Lucas, Richard E., 2006. "Lags and Leads in Life Satisfaction: A Test of the Baseline Hypothesis," IZA Discussion Papers 2526, Institute for the Study of Labor (IZA).
  12. Bonsang Eric & Klein Tobias J., 2011. "Retirement and Subjective Well-Being," ROA Research Memorandum 005, Maastricht University, Research Centre for Education and the Labour Market (ROA).
  13. Daniel Kahneman & Alan B. Krueger, 2006. "Developments in the Measurement of Subjective Well-Being," Journal of Economic Perspectives, American Economic Association, vol. 20(1), pages 3-24, Winter.
  14. Daniel Kahneman & Alan B. Krueger & David Schkade & Norbert Schwarz & Arthur Stone, 2004. "Toward National Well-Being Accounts," American Economic Review, American Economic Association, vol. 94(2), pages 429-434, May.
  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. Clark, Andrew E & Georgellis, Yannis & Sanfey, Peter, 2001. "Scarring: The Psychological Impact of Past Unemployment," Economica, London School of Economics and Political Science, vol. 68(270), pages 221-41, May.
  17. Knabe, Andreas & Rätzel, Steffen & Schöb, Ronnie & Weimann, Joachim, 2009. "Dissatisfied with life, but having a good day: time-use and well-being of the unemployed," Discussion Papers 2009/13, Free University Berlin, School of Business & Economics.
  18. Oswald, Andrew J. & Powdthavee, Nattavudh, 2008. "Does happiness adapt? A longitudinal study of disability with implications for economists and judges," Journal of Public Economics, Elsevier, vol. 92(5-6), pages 1061-1077, June.
  19. 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.
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  21. Andrew E. Clark, 2006. "A Note on Unhappiness and Unemployment Duration," Applied Economics Quarterly (formerly: Konjunkturpolitik), Duncker & Humblot, Berlin, vol. 52(4), pages 291-308.
  22. Stutzer, Alois & Lalive, Rafael, 2001. "The Role of Social Work Norms in Job Searching and Subjective Well-Being," IZA Discussion Papers 300, Institute for the Study of Labor (IZA).
  23. Andrew E. Clark & Andreas Knabe & Steffen Rätzel, 2008. "Boon or Bane? Others' unemployment, well-being and job insecurity," PSE Working Papers halshs-00586022, HAL.
  24. Gert G. Wagner & Joachim R. Frick & Jürgen Schupp, 2007. "The German Socio-Economic Panel Study (SOEP) – Scope, Evolution and Enhancements," Schmollers Jahrbuch : Journal of Applied Social Science Studies / Zeitschrift für Wirtschafts- und Sozialwissenschaften, Duncker & Humblot, Berlin, vol. 127(1), pages 139-169.
  25. repec:pse:psecon:2008-67 is not listed on IDEAS
  26. George A. Akerlof & Rachel E. Kranton, 2000. "Economics And Identity," The Quarterly Journal of Economics, MIT Press, vol. 115(3), pages 715-753, August.
  27. repec:pse:psecon:2009-18 is not listed on IDEAS
  28. repec:hal:wpaper:halshs-00586022 is not listed on IDEAS
  29. Paul Dolan & Daniel Kahneman, 2008. "Interpretations Of Utility And Their Implications For The Valuation Of Health," Economic Journal, Royal Economic Society, vol. 118(525), pages 215-234, 01.
  30. Clark, Andrew E & Oswald, Andrew J, 1994. "Unhappiness and Unemployment," Economic Journal, Royal Economic Society, vol. 104(424), pages 648-59, May.
  31. 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.
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