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Regional Unemployment and Norm-Induced Effects on Life Satisfaction

  • Adrian Chadi

    ()

    (Institute for Labour Law and Industrial Relations in the EU, University of Trier)

While rising unemployment generally reduces people’s happiness, researchers argue that there is a compensating social-norm effect for the unemployed individual, who might suffer less when it is more common to be unemployed. This empirical study rejects this thesis for German panel data, however, and finds that individual unemployment is even more hurtful when regional unemployment is higher. On the other hand, an extended model that separately considers individuals who feel stigmatised from living off public funds yields strong evidence that this group of people does in fact suffer less when the normative pressure to earn one’s own living is lower. A comprehensive discussion reconciles these findings with the existing research and concludes that in order to find evidence for the often-described social-norm effect it is worthwhile to analyse disutility associated with benefit receipts.

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Paper provided by Institute of Labour Law and Industrial Relations in the European Union (IAAEU) in its series IAAEU Discussion Papers with number 201306.

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Date of creation: Apr 2013
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Handle: RePEc:iaa:dpaper:201306
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