Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/150938 
Year of Publication: 
2011
Series/Report no.: 
SOEPpapers on Multidisciplinary Panel Data Research No. 393
Publisher: 
Deutsches Institut für Wirtschaftsforschung (DIW), Berlin
Abstract: 
This paper examines the existence of a habituation effect to unemployment: Do the unemployed suffer less from job loss if unemployment is more widespread, if their own unemployment lasts longer and if unemployment is a recurrent experience? The underlying idea is that unemployment hysteresis may operate through a sociological channel: if many people in the community lose their job and remain unemployed over an extended period, the psychological cost of beingunemployed diminishes and the pressure to accept a new job declines. We analyze this question with individual-level data from the German Socio-Economic Panel (1984-2009) and the Swiss Household Panel (2000-2009). We find no evidence for a mitigating effect of high surrounding unemployment on unemployed individuals' subjective well-being: Becoming unemployed hurts as much when regional unemployment is high as when it is low. Likewise, the strongly harmful impact of being unemployed on well-being does not wear off over time, nor do repeated episodes of unemployment make it any better. It thus appears doubtful that an unemployment shock becomes persistent because the unemployed become used to, and hence reasonably content with, being without a job.
Subjects: 
Subjective well-being
unemployment
hysteresis
happiness
social norm
Document Type: 
Working Paper

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