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Unemployment: Where does it Hurt?


  • Winkelmann, Liliana
  • Winkelmann, Rainer


We investigate how individual well-being is affected by unemployment. Analysing panel data on life satisfaction, we find that unemployment has a large and negative effect. The lack of evidence for a similar effect of non-participation casts doubt on the natural rate view of unemployment. Further, we decompose the total well-being costs of unemployment and find that between 85% and 93% are non-pecuniary, and that only 7-15% are pecuniary. The main implication is that the benefits of employment generating policies exceed the benefits of policies that are designed to mitigate the effects of unemployment through income transfers.

Suggested Citation

  • Winkelmann, Liliana & Winkelmann, Rainer, 1995. "Unemployment: Where does it Hurt?," CEPR Discussion Papers 1093, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:1093

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    References listed on IDEAS

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    Blog mentions

    As found by, the blog aggregator for Economics research:
    1. A Global Marshall Plan for Joblessness?
      by Pavlina R. Tcherneva in INET Blog on 2016-05-11 15:00:00
    2. A Global Marshall Plan for Joblessness?
      by Pavlina Tcherneva in Multiplier Effect on 2016-05-12 21:11:12
    3. A Global Marshall Plan for Joblessness?
      by Pavlina Tcherneva in New Economic Perspectives on 2016-05-12 21:17:40


    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.

    Cited by:

    1. Piet Ouweneel, 2002. "Social Security and Well-Being of the Unemployed in 42 Nations," Journal of Happiness Studies, Springer, vol. 3(2), pages 167-192, June.
    2. Barré, Germain, 2012. "L' « esquive » du politique des jeunes français et sa relation avec le conformisme dans la sphère privée (étude empirique)," Economics Thesis from University Paris Dauphine, Paris Dauphine University, number 123456789/9781 edited by Lazega, Emmanuel, April.
    3. Charlier, E., 1997. "Equivalence Scales for the Former West Germany," Discussion Paper 1997-74, Tilburg University, Center for Economic Research.
    4. Bigsten, Arne & Shimeles, Abebe, 2004. "Prospects for 'Pro-Poor' Growth in Africa," WIDER Working Paper Series 042, World Institute for Development Economic Research (UNU-WIDER).
    5. 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.
    6. Krause, Annabelle, 2013. "Don’t worry, be happy? Happiness and reemployment," Journal of Economic Behavior & Organization, Elsevier, vol. 96(C), pages 1-20.
    7. Cem Başlevent & Hasan Kirmanoğlu, 2014. "The Impact of Deviations from Desired Hours of Work on the Life Satisfaction of Employees," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 118(1), pages 33-43, August.
    8. Gerlach, Knut & Stephan, Gesine, 1996. "A paper on unhappiness and unemployment in Germany," Economics Letters, Elsevier, vol. 52(3), pages 325-330, September.
    9. Charlier, E., 1997. "Limited dependent variable models for panel data," Other publications TiSEM a62de6c4-ca26-4d7a-8884-c, Tilburg University, School of Economics and Management.
    10. Cem Başlevent & Hasan Kirmanoğlu, 2017. "Gender Inequality in Europe and the Life Satisfaction of Working and Non-working Women," Journal of Happiness Studies, Springer, vol. 18(1), pages 107-124, February.

    More about this item


    Costs of Unemployment; Panel Data; Satisfaction;

    JEL classification:

    • D6 - Microeconomics - - Welfare Economics
    • J6 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers


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