Why Does Unemployment Hurt the Employed? Evidence from the Life Satisfaction Gap between the Public and the Private Sector
35 Pages Posted: 23 May 2008
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
JEL Classification: E24, I31, J30, J45, J64
Suggested Citation: Suggested Citation
Do you have negative results from your research you’d like to share?
Recommended Papers
-
Scarring or Scaring? The Psychological Impact of Past Unemployment and Future Unemployment Risk
By Andreas Knabe and Steffen Raetzel
-
By Simon Luechinger, Stephan Meier, ...
-
Dissatisfied with Life, but Having a Good Day: Time-Use and Well-Being of the Unemployed
By Andreas Knabe, Steffen Raetzel, ...
-
Boon or Bane? Others' Unemployment, Well-Being and Job Insecurity
By Andrew Clark, Andreas Knabe, ...
-
Boon or Bane? Others' Unemployment, Well-Being and Job Insecurity
By Andrew Clark, Andreas Knabe, ...
-
Exploring the Economic and Social Determinants of Psychological and Psychosocial Health