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

30 Pages Posted: 21 Jun 2009

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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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, at least for men. Men with good job prospects, both employed and unemployed, are strongly negatively affected by regional unemployment. However, insecure employed men and poor-prospect unemployed men are less negatively, or even positively, affected. There is however no clear relationship for women. We analyse labour-market inequality and unemployment hysteresis in the light of our results.

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

JEL Classification: I31, D84, J60

Suggested Citation

Clark, Andrew Eric and Knabe, Andreas and Knabe, Andreas and Raetzel, Steffen, Boon or Bane? Others' Unemployment, Well-Being and Job Insecurity. IZA Discussion Paper No. 4210, Available at SSRN: https://ssrn.com/abstract=1423326 or http://dx.doi.org/10.2139/ssrn.1423326

Andrew Eric Clark (Contact Author)

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

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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