Scarring: The Psychological Impact of Past Unemployment

Andrew Clark, Yannis Georgellis () and Peter Sanfey

Studies in Economics from School of Economics, University of Kent

Abstract: This paper provides some of the first empirical evidence on the psychological impact of past unemployment. Using eleven waves of the German socio-economic panel (GSOEP) data set, we show, as is now standard, that those currently unemployed have far lower life satisfaction scores than do the currently employed. We also show that, over the whole sample, well-being is lower the greater has been the past experience of unemployment. In this sense, unemployment scars. However, an interaction term between current and past unemployment attracts a positive coefficient. This suggests a habituation effect whereby the negative well-being effect of unemployment is much lower for those who have been unemployed more often in the past. We also use the panel aspect of our data to present some evidence that those who suffer greater falls in well-being on entering unemployment are less likely to remain unemployed one year later. Together these findings offer a psychological explanation of persistent unemployment.

Keywords: Unemployment; Life Satisfaction; Habituation; Hysteresis (search for similar items in EconPapers)
JEL-codes: D10 J28 J63 (search for similar items in EconPapers)
Date: 1999-01
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (24)

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Journal Article: Scarring: The Psychological Impact of Past Unemployment (2001)
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