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Well-being Consequences of Unemployment

Namkee Ahn(FEDEA)

J. R. García(FEDEA)

J. F. Jimeno(Banco de España)

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“The great end of all human industry is the attainment of happiness. For this were arts invented, sciences cultivated, laws ordained, and societies modelled, ... Even the lonely savage, ..., forgets not, for a moment, this grand object of his being.”

David Hume (1742, The Stoic)

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Consequences of Unemployment

Income and consumption drop. Psychological and emotional damage: Loss of

identity, low self-esteem, stress, anxiety, depression.

Gain more time for non-market activity: leisure, training, physical exercise and home-making activity.

Impact on other family members.

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Information onIndividual Well-being in ECHP

Satisfaction with Work or Main Activity Satisfaction with Financial Situation Satisfaction with Housing Situation Satisfaction with Leisure Time Health Status

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In this paper:

Well-being differences between the employed and the unemployed: Determinants.

Differences across country: Determinants. Institutional factors: Unemployment protection,

labor market functioning, expectation.

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Table 1: Average Satisfaction Levels among the Employees and the UnemployedData: Pooled Cross-section of ECHP (1994-2001)

Main activity Finance Leisure time

Country Emp. Un. Diff. Emp. Un. Diff. Emp. Un. Diff. UR

Total 4,38 2,63 1,76 3,81 2,42 1,39 3,86 4,36 -0,49 9,26

Austria 4,93 3,00 1,93 4,29 2,70 1,59 4,47 4,96 -0,49 4,06

Belgium 4,49 3,03 1,46 4,16 2,94 1,22 3,88 4,62 -0,74 8,71

Denmark 4,93 4,10 0,83 4,54 3,50 1,04 4,31 5,00 -0,68 5,54

Finland 4,54 3,03 1,51 4,03 2,64 1,40 4,12 4,95 -0,83 12,48

France 4,41 2,57 1,84 3,70 2,38 1,32 3,97 4,44 -0,47 10,84

Germany 4,37 2,11 2,26 3,86 2,21 1,65 3,89 4,59 -0,70 8,30

Greece 3,99 2,09 1,90 3,34 2,09 1,26 3,39 4,34 -0,95 10,20

Ireland 4,57 2,71 1,86 3,84 2,00 1,84 4,22 4,26 -0,04 8,69

Italy 4,03 1,92 2,11 3,45 1,88 1,57 3,55 4,13 -0,58 11,05

Luxembourg 4,75 2,18 2,56 4,23 2,04 2,19 4,32 4,99 -0,67 3,00

Netherlands 4,73 4,04 0,69 4,59 3,69 0,90 4,06 4,46 -0,40 4,59

Portugal 4,00 1,85 2,14 3,11 1,96 1,15 3,57 3,90 -0,33 5,76

Spain 4,23 2,38 1,85 3,44 2,08 1,35 3,40 4,11 -0,71 15,45

UK 4,33 2,51 1,82 3,77 1,96 1,80 3,80 4,33 -0,53 8,60

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Table 2: Changes in satisfaction by changes in employment status between any two consecutive years

Main Activity Finance

EE EU UE UU EE EU UE UU

Total -0,025 -1,150 1,418 0,047 0,019 -0,605 0,856 0,024

Austria -0,015 -1,363 1,811 0,047 0,004 -0,874 1,010 0,027

Belgium -0,025 -0,979 1,820 0,129 0,000 -0,679 0,893 0,026

Denmark -0,050 -0,390 0,646 -0,002 -0,011 -0,555 0,693 0,006

Finland -0,043 -0,952 1,571 0,139 0,052 -0,580 1,017 0,071

France -0,035 -1,198 1,785 0,182 0,010 -0,503 0,845 0,079

Germany -0,071 -1,746 1,638 -0,308 -0,060 -0,734 0,865 -0,132

Greece 0,002 -1,119 1,155 -0,018 0,069 -0,619 0,734 0,001

Ireland -0,023 -1,243 1,576 0,148 0,072 -0,728 1,108 0,062

Italy -0,025 -1,209 1,391 0,025 0,012 -0,748 0,896 0,046

Netherlands -0,019 -0,641 0,739 0,042 0,026 -0,492 0,675 0,017

Portugal -0,003 -1,466 1,582 -0,012 0,017 -0,681 0,743 -0,043

Spain -0,022 -1,195 1,550 -0,028 0,034 -0,472 0,912 -0,016

UK -0,054 -1,598 1,141 0,103 0,031 -0,828 0,991 0,082

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Leisure time Number of Observations

EE EU UE UU EE EU UE UU

Total -0,013 0,624 -0,616 -0,021 208,440 6,181 6,922 16,166

Austria -0,019 0,810 -0,607 0,047 11,818 294 201 365

Belgium -0,004 0,710 -0,724 -0,058 13,896 271 254 1,384

Denmark -0,020 0,685 -0,571 -0,054 13,494 379 443 523

Finland -0,027 0,662 -0,595 -0,003 11,847 398 510 977

France 0,014 0,503 -0,551 -0,044 28,506 804 779 2,154

Germany -0,077 0,655 -0,848 -0,114 7,056 232 179 332

Greece -0,034 0,713 -0,904 -0,097 12,692 521 640 1,164

Ireland 0,001 0,209 -0,337 0,122 10,621 224 295 886

Italy -0,030 0,681 -0,684 -0,011 27,022 625 859 2,881

Netherlands -0,016 0,618 -0,335 0,011 23,092 383 534 1,720

Portugal -0,008 0,208 -0,187 0,001 21,088 597 562 958

Spain 0,017 0,819 -0,766 -0,031 20,588 1,323 1,510 2,595

UK -0,037 0,344 -0,661 0,130 5,239 109 137 207

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Table 3: Results from Fixed-Effect OLS RegressionsData: ECHP 1994-2001

Main activity Finance Leisure timeCoeffi | t | Coeffi | t | Coeffi | t |

Health (re: very bad)

Very good 0,79 37,08 0,51 25,78 0,39 17,20

Good 0,65 31,18 0,42 21,80 0,26 11,57

Fair 0,53 25,44 0,30 15,93 0,14 6,45

Bad 0,28 13,44 0,16 8,15 0,13 5,88

Social club 0,02 3,72 0,00 -0,72 0,03 6,31

Contact with friends 0,02 3,80 0,02 4,66 0,07 13,07

Contact with relatives 0,05 9,04 0,05 9,70 0,10 18,38

Log Household income 0,17 32,43 0,45 91,14 0,00 0,28

Log Unemployment rate 0,01 1,74 -0,25 -32,68 -0,05 -5,64

Hausman Chi-sq. (fixed vs random effect)

7173.37 7483.06 3129.38

N 444310 444310 444310

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Table 3: Continued

Main Activity Finance Leisure time

Coeff. |t| Coeff. |t| Coeff. |t|

Unemployed (re: employed) -1,68 -28,22 -0,80 -14,52 0,73 11,45

Unemployed * (re: Germany)

Austria 0,35 4,53 0,11 1,54 -0,09 -1,03

Belgium 0,43 5,97 0,14 2,07 -0,08 -1,00

Denmark 1,00 14,57 0,33 5,12 -0,07 -0,98

Finland 0,31 4,51 0,08 1,26 -0,04 -0,50

France 0,25 3,91 0,15 2,60 -0,14 -2,10

Greece 0,62 9,58 0,17 2,79 0,12 1,73

Ireland 0,39 5,29 -0,01 -0,09 -0,46 -5,77

Italy 0,44 7,02 0,06 0,97 -0,12 -1,79

Netherlands 1,21 19,00 0,36 6,16 -0,40 -5,91

Portugal 0,26 3,94 0,18 2,96 -0,45 -6,37

Spain 0,43 6,87 0,16 2,80 -0,01 -0,16

UK 0,50 5,26 0,10 1,22 -0,35 -3,57

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Germany

Belgium

France

Netherlands

Denmark

Austria

United Kingdom

PortugalIreland

FinlandSpain

Italy

Unemp.effect = -2.6078Long-term unemp. - 0.5158R2 = 0.2268

-1.8

-1.6

-1.4

-1.2

-1

-0.8

-0.6

-0.4

-0.2

0 1 2 3 4 5 6

Long-term unemployment rate (%)U

nem

ploy

men

t eff

ect

ItalySpain

FinlandIreland

Portugal

United Kingdom

Austria

Denmark

Netherlands

France

Belgium

Germany

Unemp. effect = 0.8629Rep. rate - 1.6555R2 = 0.1742

-1.8

-1.6

-1.4

-1.2

-1

-0.8

-0.6

-0.4

-0.2

0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8

Replacement rate of unemployment benefits

Une

mpl

oym

ent e

ffec

t

SpainFinland Ireland

Portugal

UnitedKingdom

Austria

Denmark

Netherlands

France

Belgium

Germany

Unemp. effect = 0.4821Duration of UB - 1.5426R2 = 0.0806

-1.8

-1.6

-1.4

-1.2

-1

-0.8

-0.6

-0.4

-0.2

0 0.2 0.4 0.6 0.8 1 1.2

Index of duration of unemployment benefits

Une

mpl

oym

ent e

ffec

t

ItalySpain

FinlandIreland

Portugal

United Kingdom

Austria

Denmark

Netherlands

France

Belgium

Germany

Unemp. effect = 0.288Expenditure - 1.5428R2 = 0.1688

-1.8

-1.6

-1.4

-1.2

-1

-0.8

-0.6

-0.4

-0.2

0 0.25 0.5 0.75 1 1.25 1.5 1.75 2

Expenditure on active labor market policies

Une

mpl

oym

ent e

ffec

t

Grecia

ItalySpain

FinlandIreland

Portugal

United KingdomAustria

Denmark

Netherlands

FranceBelgium

Germany

Unemp. effect = 0.0115(% good job prosp.) - 1.4377R2 = 0.2182

-1.8

-1.6

-1.4

-1.2

-1

-0.8

-0.6

-0.4

-0.2

0 10 20 30 40 50

Good job prospect (%)

Une

mpl

oym

ent e

ffec

t