Unemployment: Where Does It Hurt?
Abstract: We investigate how individual well-being is affected by unemployment. Analyzing German panel data on life-satisfaction, we find that unemployment has a large and negative effect for male individuals. The effect is large enough to increase the probability that a mid-aged male is dissatisfied by more than 10 percentage points. We decompose the total well-being costs of unemployment and find that for males at least two thirds are non-pecuniary while at most one third are pecuniary costs. One implication is that the benefits of employment generating policies exceed the benefits of policies that are designed to mitigate the effects of unemployment through income transfers.