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Boon or Bane? Others' unemployment, well-being and job insecurity

  • Andrew E. Clark

    (EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris, IZA - Institute for the Study of Labor - IZA, PSE - Paris-Jourdan Sciences Economiques - CNRS : UMR8545 - École des Hautes Études en Sciences Sociales (EHESS) - École des Ponts ParisTech (ENPC) - École normale supérieure [ENS] - Paris)

  • Andreas Knabe

    (OVGU - Otto-von-Guericke University Magdeburg - Otto-von-Guericke University Magdeburg, CESifo - CESifo)

  • Steffen Rätzel

    (OVGU - Otto-von-Guericke University Magdeburg - Otto-von-Guericke University Magdeburg)

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 HAL in its series PSE Working Papers with number halshs-00586022.

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Date of creation: Dec 2008
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Handle: RePEc:hal:psewpa:halshs-00586022
Note: View the original document on HAL open archive server: http://halshs.archives-ouvertes.fr/halshs-00586022
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  1. 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.
  2. Robert J. MacCulloch & Rafael Di Tella & Andrew J. Oswald, 2001. "Preferences over Inflation and Unemployment: Evidence from Surveys of Happiness," American Economic Review, American Economic Association, vol. 91(1), pages 335-341, March.
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