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Unemployment and Subjective Well-being: Does Money Make a Difference

Takis Venetoklis () and Heikki Ervasti

No 391, Discussion Papers from VATT Institute for Economic Research

Abstract: In this paper we focus on the level of subjective well-being and its determinants among the unemployed as compared with those currently in paid labour. In theoretical terms, strongly contradictory views prevail on the effects of unemployment on subjective well-being. Whereas the traditional deprivation theory maintains that unemployment is a major psychological stressor, the incentive theory suggests that the level of well-being among the unemployed is far too high for them to actively and effectively search for a new job and to reenter the labour market. Using the European Social Survey (ESS) data our empirical analysis suggests that perhaps, neither of these theories are entirely correct. The deprivation theory points to the right direction by stressing the psychological factors associated with unemployment but makes a notable mistake by disregarding the economic factors which prove to be mot most crucial factor for the well-being of the unemployed. The incentive theory gets no support at all in our empirical analysis.

Keywords: Unemployment; subjective well-being; deprivation theory; incentive theory; Labour market; Työmarkkinat; Social security; Sosiaaliturva; Taxation and Social Transfers; Julkisen talouden rahoitus ja tulonsiirrot (search for similar items in EconPapers)
Date: 2006
New Economics Papers: this item is included in nep-lab
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