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Unemployment and Psychological Well-Being

Nick Carroll

No 492, CEPR Discussion Papers from Centre for Economic Policy Research, Research School of Economics, Australian National University

Abstract: Who records the largest drops in life satisfaction when they move into unemployment? Do men experience a larger drop in life satisfaction than women? Do Australians and Americans record a larger drop than Europeans? Using an Australian panel data-set (the Household Income and Labour Dynamics Survey of Australia), this paper finds that the unemployed in Australia report lower life satisfaction than observationally equivalent employed people (holding current income constant). Being currently unemployed is estimated to be equivalent to the loss of $42,100 annual income for men and $86,300 annual income for women. Thus, the drop in life satisfaction, after controlling for unobserved time invariant characteristics, associated with unemployment is larger for women than men. The impact of unemployment on life satisfaction is large compared to the drops in life satisfaction associated with changes in income and disability status. It is found that unemployment is less painful for men in Australia than for men in Germany and the United Kingdom. The paper hypothesises that the large fall in life satisfaction may be the result of a drop in life-time earnings, as well as a ‘psychological’ effect.

Keywords: well-being; happiness; unemployment (search for similar items in EconPapers)
JEL-codes: I31 J64 (search for similar items in EconPapers)
Pages: 39 pages
Date: 2005-07
New Economics Papers: this item is included in nep-cbe, nep-lab and nep-ltv
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Journal Article: Unemployment and Psychological Well‐being (2007) Downloads
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