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Changing Identity: Retiring from Unemployment

  • Clemens Hetschko


    (Faculty of Economics and Business, FU Berlin)

  • Andreas Knabe


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

  • Ronnie Schöb


    (Faculty of Economics and Business, FU Berlin)

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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Paper provided by Otto-von-Guericke University Magdeburg, Faculty of Economics and Management in its series FEMM Working Papers with number 110017.

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Length: 31 pages
Date of creation: Jul 2011
Date of revision:
Handle: RePEc:mag:wpaper:110017
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  1. Gert G. Wagner & Joachim R. Frick & Jürgen Schupp, 2007. "The German Socio-Economic Panel Study (SOEP): Scope, Evolution and Enhancements," SOEPpapers on Multidisciplinary Panel Data Research 1, DIW Berlin, The German Socio-Economic Panel (SOEP).
  2. George A. Akerlof & Rachel E. Kranton, 2000. "Economics And Identity," The Quarterly Journal of Economics, MIT Press, vol. 115(3), pages 715-753, August.
  3. Andreas Knabe & Steffen Rätzel & Ronnie Schöb & Steffen Rätzel & Joachim Weimann, 2009. "Dissatisfied with life, but having a good day- time-use and well-being of the unemployed," FEMM Working Papers 09011, Otto-von-Guericke University Magdeburg, Faculty of Economics and Management.
  4. 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).
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  8. Alois Stutzer & Rafael Lalive, . "The Role of Social Work Norms in Job Searching and Subjective Well-Being," IEW - Working Papers 051, Institute for Empirical Research in Economics - University of Zurich.
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  15. 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.
  16. 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.
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  19. Andrew E. Clark, 2006. "A note on unhappiness and unemployment duration," PSE Working Papers halshs-00590444, HAL.
  20. Andreas Knabe & Steffen Rätzel, 2008. "Scarring or Scaring? The Psychological Impact of Past Unemployment and Future Unemployment Risk," CESifo Working Paper Series 2457, CESifo Group Munich.
  21. 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.
  22. 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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  25. repec:hal:wpaper:halshs-00586022 is not listed on IDEAS
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  27. Andrew E. Clark & Yannis Georgellis, 2002. "Unemployment Alters the Set-Point for Life Satisfaction," Economics and Finance Discussion Papers 02-16, Economics and Finance Section, School of Social Sciences, Brunel University.
  28. repec:pse:psecon:2009-18 is not listed on IDEAS
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