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Country-specific life satisfaction effects of unemployment: Does labour market policy matter?

  • Wulfgramm, Melike
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    Public policy shapes the lives of individuals, and even more so if they depend on state support. But to what extent can well-being differences between individuals living in different European states be traced back to the specific national public policy designs? This paper tests the intervening effects of the design and generosity of labour market policy on the life satisfaction of the unemployed. To estimate cross-level interaction effects in random intercept models, macro-indicators on active labour market policy spending and unemployment benefit generosity of 21 European countries are merged with survey data from the European Social Survey (ESS). While unemployment has strong negative life satisfaction effects all over Europe, the generosity of passive labour market policy moderates this effect to a surprisingly large extent: The adverse effect of unemployment is almost doubled in a country with meagre unemployment benefits. This moderating effect can be explained both by a resource as well as a non-pecuniary mechanism. In contrast, the moderating effect of active labour market policy is less robust across model specifications.

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    Paper provided by University of Bremen, Centre for Social Policy Research (ZeS) in its series Working papers of the ZeS with number 07/2012.

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    Date of creation: 2012
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    Handle: RePEc:zbw:zeswps:072012
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    1. Oswald, Andrew J, 1997. "Happiness and Economic Performance," Economic Journal, Royal Economic Society, vol. 107(445), pages 1815-31, November.
    2. 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.
    3. Nick Carroll, 2007. "Unemployment and Psychological Well-being," The Economic Record, The Economic Society of Australia, vol. 83(262), pages 287-302, 09.
    4. Easterlin, Richard A, 2001. "Income and Happiness: Towards an Unified Theory," Economic Journal, Royal Economic Society, vol. 111(473), pages 465-84, July.
    5. Di Tella, R. & MacCulloch, R.J.: Oswald, A.J., 1997. "The Macroeconomics of Happiness," Papers 19, Centre for Economic Performance & Institute of Economics.
    6. Clark, Andrew E & Oswald, Andrew J, 1994. "Unhappiness and Unemployment," Economic Journal, Royal Economic Society, vol. 104(424), pages 648-59, May.
    7. Fromm, Sabine & Sproß, Cornelia, 2008. "Die Aktivierung erwerbsfähiger Hilfeempfänger : Programme, Teilnehmer, Effekte im internationalen Vergleich," IAB-Forschungsbericht 200801, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
    8. Friedel Bolle & Simon Kemp, 2009. "Can We Compare Life Satisfaction Between Nationalities? Evaluating Actual and Imagined Situations," Social Indicators Research, Springer, vol. 90(3), pages 397-408, February.
    9. Mavridis, Dimitris, 2010. "Can subjective well-being predict unemployment length ?," Policy Research Working Paper Series 5293, The World Bank.
    10. Ada Ferrer-i-Carbonell & Paul Frijters, 2002. "How important is Methodology for the Estimates of the Determinants of Happiness?," Tinbergen Institute Discussion Papers 02-024/3, Tinbergen Institute.
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