Scarring: The Psychological Impact of Past Unemployment

Posted: 26 Jan 2002  

Andrew Clark

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

Yannis Georgellis

University of Kent, Canterbury - Kent Business School

Peter Sanfey

European Bank for Reconstruction and Development (EBRD)

Abstract

This paper considers the psychological impact of past unemployment. Using eleven waves of German panel data, we show that life satisfaction is lower not only for the current unemployed (relative to the employed), but also for those with higher levels of past unemployment. However, the negative well-being effect of current unemployment is weaker for those who have been unemployed more often in the past. The panel data also reveal some evidence that those suffering greater falls in well-being on entering unemployment are less likely to remain unemployed one year later. Together these findings offer a psychological explanation of persistent unemployment.

Keywords: Unemployment, Life Satisfaction, Habituation, Hysteresis

JEL Classification: D10, J28, J63

Suggested Citation

Clark, Andrew and Georgellis, Yannis and Sanfey, Peter, Scarring: The Psychological Impact of Past Unemployment. Economica, Vol. 68, May 2001. Available at SSRN: https://ssrn.com/abstract=282626

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

Yannis Georgellis (Contact Author)

University of Kent, Canterbury - Kent Business School ( email )

Canterbury, Kent CT2 7PE
United Kingdom

Peter Sanfey

European Bank for Reconstruction and Development (EBRD) ( email )

One Exchange Square
London, EC2A 2JN
United Kingdom
+44 20 7338 6227 (Phone)
+44 20 7338 6110 (Fax)

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