DP1093 Unemployment: Where does it Hurt?
|Author(s):||Rainer Winkelmann, Liliana Winkelmann|
|Publication Date:||January 1995|
|Keyword(s):||Costs of Unemployment, Panel Data, Satisfaction|
|Programme Areas:||Human Resources|
|Link to this Page:||cepr.org/active/publications/discussion_papers/dp.php?dpno=1093|
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.