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Research ArticleArticles

Why Does Unemployment Hurt the Employed?

Evidence from the Life Satisfaction Gap Between the Public and the Private Sector

Simon Luechinger, Stephan Meier and Alois Stutzer
Journal of Human Resources, October 2010, 45 (4) 998-1045; DOI: https://doi.org/10.3368/jhr.45.4.998
Simon Luechinger
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Stephan Meier
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Alois Stutzer
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Abstract

High unemployment rates entail substantial costs to the working population in terms of reduced subjective well-being. This paper studies the importance of individual economic security, in particular job security, by exploiting sector-specific institutional differences in the exposure to economic shocks. Public servants have stricter dismissal protection and face a lower risk of their organization becoming bankrupt than private sector employees. The empirical results from individual panel data for Germany and repeated cross-sectional data for the United States and Europe show that private sector employees’ subjective well-being reacts indeed much more sensitive to fluctuations in unemployment rates than public sector employees’.

  • Received April 2008.
  • Accepted July 2009.
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Journal of Human Resources
Vol. 45, Issue 4
2 Oct 2010
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Why Does Unemployment Hurt the Employed?
Simon Luechinger, Stephan Meier, Alois Stutzer
Journal of Human Resources Oct 2010, 45 (4) 998-1045; DOI: 10.3368/jhr.45.4.998

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Why Does Unemployment Hurt the Employed?
Simon Luechinger, Stephan Meier, Alois Stutzer
Journal of Human Resources Oct 2010, 45 (4) 998-1045; DOI: 10.3368/jhr.45.4.998
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  • Article
    • Abstract
    • I. Introduction
    • II. Unemployment and People’s Well-Being
    • III. The Life Satisfaction Gap Between Employees in the Public and the Private Sectors
    • IV. Empirical Analysis for Germany
    • V. Empirical Analysis for the United States and the European Union
    • V. Concluding Remarks
    • Appendix 1 Data
    • Footnotes
    • References
  • Figures & Data
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