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Discussion Paper Details

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Title: Unemployment: Where does it Hurt?

Author(s): Rainer Winkelmann and Liliana Winkelmann

Publication Date: January 1995

Keyword(s): Costs of Unemployment, Panel Data and Satisfaction

Programme Area(s): Human Resources

Abstract: We investigate how individual well-being is affected by unemployment. Analysing panel data on life satisfaction, we find that unemployment has a large and negative effect. The lack of evidence for a similar effect of non-participation casts doubt on the natural rate view of unemployment. Further, we decompose the total well-being costs of unemployment and find that between 85% and 93% are non-pecuniary, and that only 7-15% are pecuniary. The main implication is that the benefits of employment generating policies exceed the benefits of policies that are designed to mitigate the effects of unemployment through income transfers.

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Bibliographic Reference

Winkelmann, R and Winkelmann, L. 1995. 'Unemployment: Where does it Hurt?'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=1093