Working Paper: CEPR ID: DP8842
Authors: Anne Gielen; Jan C. van Ours
Abstract: It is puzzling that people feel quite unhappy when they become unemployed, while at the same time active labor market policies are needed to bring unemployed back to work more quickly. Using data from the German Socio-Economic Panel, we investigate whether there is indeed such a puzzle. First, we find that nearly half of the unemployed do not experience a drop in happiness, which might explain why at least some workers need to be activated. In addition to that, we find that even though unemployed who experience a drop in happiness search more actively for a job, it does not speed up their job finding. Apparently, there is no link between unhappiness and the speed of job finding. Hence, there is no contradiction between unemployed being unhappy and the need for activation policies.
Keywords: happiness; unemployment; duration
JEL Codes: I31; J64
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Unhappiness (I31) | Job finding rates (J68) |
| Drop in happiness (D19) | Job finding rates (J68) |
| Drop in happiness (D19) | Search behavior (D83) |
| Change in life satisfaction when becoming unemployed (J63) | Quality of post-unemployment jobs (J68) |
| Change in life satisfaction when becoming unemployed (J63) | Wages earned (J31) |
| Unhappiness (I31) | Search intensity (D83) |
| Search intensity (D83) | Job finding rates (J68) |