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Scarring or Scaring? The Psychological Impact of Past Unemployment and Future Unemployment Risk

Author

Listed:
  • Andreas Knabe

    (Faculty of Economics and Management, Otto-von-Guericke University Magdeburg)

  • Steffen Rätzel

    (Faculty of Economics and Management, Otto-von-Guericke University Magdeburg)

Abstract

We reassess the “scarring” hypothesis by Clark et al. (2001) which states that unemployment experienced in the past reduces a person’s current life satisfaction even after the person has become reemployed. Our results suggest that it is not the scar from past unemployment but the expectation to become unemployed in the future that makes people unhappy. Hence, the terminology should be changed by one letter: unemployment is not “scarring”, but “scaring”.

Suggested Citation

  • 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.
    • Handle: RePEc:mag:wpaper:08013
    as

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    References listed on IDEAS

    as
    1. 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.
    2. Blanchflower, David G. & Oswald, Andrew J., 2004. "Well-being over time in Britain and the USA," Journal of Public Economics, Elsevier, vol. 88(7-8), pages 1359-1386, July.
    3. 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 221-241, May.
    4. Frey, Bruno S & Stutzer, Alois, 2000. "Happiness, Economy and Institutions," Economic Journal, Royal Economic Society, vol. 110(466), pages 918-938, October.
    5. Clark, Andrew E & Oswald, Andrew J, 1994. "Unhappiness and Unemployment," Economic Journal, Royal Economic Society, vol. 104(424), pages 648-659, May.
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    unemployment; scarring; happiness; life satisfaction;
    All these keywords.

    JEL classification:

    • J28 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Safety; Job Satisfaction; Related Public Policy
    • J60 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - General
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making

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