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Why Does Unemployment Hurt the Employed? Evidence from the Life Satisfaction Gap between the Public and the Private Sector

Simon Luechinger (), Stephan Meier () and Alois Stutzer ()

No 3385, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: High rates of unemployment entail substantial costs to the working population in terms of reduced subjective well-being. This paper studies the importance of individual economic security, in particular job security, in workers’ well-being by exploiting sector-specific institutional differences in the exposure to economic shocks. Public servants have stricter dismissal protection and face a lower risk of their organization’s bankruptcy than private sector employees. The empirical results for individual panel data for Germany and repeated cross-sectional data for the United States and the European Union show that the sensitivity of subjective well-being to fluctuations in unemployment rates is much lower in the public sector than in the private. This suggests that increased economic insecurity constitutes an important welfare loss associated with high general unemployment.

Keywords: unemployment; life satisfaction; job security; public sector (search for similar items in EconPapers)
JEL-codes: E24 I31 J30 J45 J64 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-hap, nep-lab and nep-mac
Date: 2008-03
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Published in: Journal of Human Resources, 2010, 45(4), 998-1045

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Related works:
Journal Article: Why Does Unemployment Hurt the Employed?: Evidence from the Life Satisfaction Gap Between the Public and the Private Sector (2010) Downloads
Working Paper: Why does unemployment hurt the employed? Evidence from the life satisfaction gap between the public and the privat sector (2008) Downloads
Working Paper: Why Does Unemployment Hurt the Employed?: Evidence from the Life Satisfaction Gap between the Public and Private Sectors (2008) Downloads
Working Paper: Why does unemployment hurt the employed?: evidence from the life satisfaction gap between the public and private sectors (2008) Downloads
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