Can Subjective Well-Being Predict Unemployment Length?

52 Pages Posted: 20 Apr 2016

See all articles by Dimitris Mavridis

Dimitris Mavridis

Paris School of Economics (PSE); The World Bank

Date Written: May 1, 2010

Abstract

This paper uses 16 waves of panel data from the British Household Panel Survey to evaluate the role of subjective well-being in determining labor market transitions. It confirms a previous finding in the literature: individuals report a fall in their happiness when they lose a job, but they report a smaller fall when they are surrounded by unemployed peers, an effect called the "social norm" . The main results of interest are that job search effort and unemployment duration are affected by the utility differential between having a job and being unemployed. Since this differential is also affected by the social norm, it implies that when unemployment increases, the unemployed are happier and they reduce their search effort. These results indicate that unemployment hysteresis has labor supply causes.

Keywords: Labor Markets, Labor Policies, Population Policies, Youth and Governance, Economic Theory & Research

Suggested Citation

Mavridis, Dimitris, Can Subjective Well-Being Predict Unemployment Length? (May 1, 2010). World Bank Policy Research Working Paper No. 5293, Available at SSRN: https://ssrn.com/abstract=1601134

Dimitris Mavridis (Contact Author)

Paris School of Economics (PSE) ( email )

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