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Subjective well-being and the duration of aggregate unemployment in Europe

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  • Ochsen, Carsten

Abstract

This study examines whether the distribution of aggregate unemployment by duration affects individual well-being. Two hypotheses are provided to explain how the shares of short-term (up to 3 months) and long-term (more than 1 year) unemployed people could affect the well-being of the employed and unemployed: The severity hypothesis and the flow hypothesis. Using data from almost 300,000 individuals from 11 EU countries, an ordered probit estimator is used to analyze the impact of the distribution of aggregate unemployment by duration on individual well-being. We find significant evidence in favor of both the severity and the flow hypotheses. Hence, the fear of losing (or not finding) a job is more detrimental when the prospect is to remain unemployed for a longer time. At some point, however, both the employed and unemployed adapt to unemployment at the macro level. Using an alternative specification that allows for a duration-specific risk of becoming/being unemployed, we arrive at similar conclusions. What seems to bother people is thus not just the risk of becoming/remaining unemployed, but more so the risk of being out of work for 4 to 12 months.

Suggested Citation

  • Ochsen, Carsten, 2008. "Subjective well-being and the duration of aggregate unemployment in Europe," Thuenen-Series of Applied Economic Theory 97, University of Rostock, Institute of Economics.
  • Handle: RePEc:zbw:roswps:97
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    References listed on IDEAS

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    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. Carol Graham & Stefano Pettinato, 2001. "Happiness, Markets, and Democracy: Latin America in Comparative Perspective," Journal of Happiness Studies, Springer, vol. 2(3), pages 237-268, September.
    3. Olivier Jean Blanchard & Peter Diamond, 1994. "Ranking, Unemployment Duration, and Wages," Review of Economic Studies, Oxford University Press, vol. 61(3), pages 417-434.
    4. Carsten Ochsen & Heinz Welsch, 2011. "The social costs of unemployment: accounting for unemployment duration," Applied Economics, Taylor & Francis Journals, vol. 43(27), pages 3999-4005.
    5. Andrew E. Clark, 2006. "A Note on Unhappiness and Unemployment Duration," Applied Economics Quarterly (formerly: Konjunkturpolitik), Duncker & Humblot, Berlin, vol. 52(4), pages 291-308.
    6. Bruno S. Frey & Alois Stutzer, 2002. "What Can Economists Learn from Happiness Research?," Journal of Economic Literature, American Economic Association, vol. 40(2), pages 402-435, June.
    7. Cameron,A. Colin & Trivedi,Pravin K., 2008. "Microeconometrics," Cambridge Books, Cambridge University Press, number 9787111235767, March.
    8. Blanchflower, David G., 2001. "Unemployment, Well-Being, and Wage Curves in Eastern and Central Europe," Journal of the Japanese and International Economies, Elsevier, vol. 15(4), pages 364-402, December.
    9. Christopher A. Pissarides, 1992. "Loss of Skill During Unemployment and the Persistence of Employment Shocks," The Quarterly Journal of Economics, Oxford University Press, vol. 107(4), pages 1371-1391.
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    Cited by:

    1. Elizabeth Oltmans Ananat & Anna Gassman-Pines & Dania V. Francis & Christina M. Gibson-Davis, 2011. "Children Left Behind: The Effects of Statewide Job Loss on Student Achievement," NBER Working Papers 17104, National Bureau of Economic Research, Inc.

    More about this item

    Keywords

    unemployment; unemployment duration; life satisfaction; happiness;

    JEL classification:

    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
    • I31 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - General Welfare, Well-Being

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