Boon or Bane? Others' Unemployment, Well-Being and Job Insecurity

32 Pages Posted: 18 Dec 2008

See all articles by Andrew Clark

Andrew Clark

Paris School of Economics (PSE); IZA Institute of Labor Economics

Andreas Knabe

Otto-von-Guericke-Universität Magdeburg - Institute of Economics and Business Administration; CESifo (Center for Economic Studies and Ifo Institute)

Steffen Raetzel

Otto-von-Guericke-Universität Magdeburg - Institute of Economics and Business Administration

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Date Written: December 2008

Abstract

The social norm of unemployment suggests that aggregate unemployment reduces the well-being of the employed, but has a far smaller effect on the unemployed. We use German panel data to reproduce this standard result, but then suggest that the appropriate distinction may not be between employment and unemployment, but rather between higher and lower levels of labour-market security. Those with good job prospects, both employed and unemployed, are strongly negatively affected by regional unemployment. However, the insecure employed and the poor-prospect unemployed are less negatively, or even positively, affected. We use our results to analyse labour-market inequality and unemployment hysteresis.

Keywords: unemployment, externalities, job insecurity, well-being

JEL Classification: D84, J60, Z13

Suggested Citation

Clark, Andrew Eric and Knabe, Andreas and Knabe, Andreas and Raetzel, Steffen, Boon or Bane? Others' Unemployment, Well-Being and Job Insecurity (December 2008). CESifo Working Paper Series No. 2501, Available at SSRN: https://ssrn.com/abstract=1317699 or http://dx.doi.org/10.2139/ssrn.1317699

Andrew Eric Clark

Paris School of Economics (PSE) ( email )

48 Boulevard Jourdan
Paris, 75014 75014
France

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Andreas Knabe (Contact Author)

Otto-von-Guericke-Universität Magdeburg - Institute of Economics and Business Administration ( email )

Universitaetsplatz 2
Magdeburg, 39016
Germany

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

Steffen Raetzel

Otto-von-Guericke-Universität Magdeburg - Institute of Economics and Business Administration ( email )

Universitaetsplatz 2
Magdeburg, 39016
Germany

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