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Scarring or Scaring? The Psychological Impact of Past Unemployment and Future Unemployment Risk

Author

Listed:
  • Andreas Knabe

    (Faculty of Economics and Management, Otto-von-Guericke University Magdeburg)

  • Steffen Rätzel

    (Faculty of Economics and Management, Otto-von-Guericke University Magdeburg)

Abstract
We reassess the “scarring” hypothesis by Clark et al. (2001) which states that unemployment experienced in the past reduces a person’s current life satisfaction even after the person has become reemployed. Our results suggest that it is not the scar from past unemployment but the expectation to become unemployed in the future that makes people unhappy. Hence, the terminology should be changed by one letter: unemployment is not “scarring”, but “scaring”.

Suggested Citation

  • Andreas Knabe & Steffen Rätzel, 2008. "Scarring or Scaring? The Psychological Impact of Past Unemployment and Future Unemployment Risk," FEMM Working Papers 08013, Otto-von-Guericke University Magdeburg, Faculty of Economics and Management.
    • Handle: RePEc:mag:wpaper:08013
    as

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    File URL: http://www.ww.uni-magdeburg.de/fwwdeka/femm/a2008_Dateien/2008_13.pdf
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    References listed on IDEAS

    as
    1. Andrew E. Clark, 2003. "Unemployment as a Social Norm: Psychological Evidence from Panel Data," Journal of Labor Economics, University of Chicago Press, vol. 21(2), pages 289-322, April.
    2. Blanchflower, David G. & Oswald, Andrew J., 2004. "Well-being over time in Britain and the USA," Journal of Public Economics, Elsevier, vol. 88(7-8), pages 1359-1386, July.
    3. repec:bla:econom:v:68:y:2001:i:270:p:221-41 is not listed on IDEAS
    4. Frey, Bruno S & Stutzer, Alois, 2000. "Happiness, Economy and Institutions," Economic Journal, Royal Economic Society, vol. 110(466), pages 918-938, October.
    5. Clark, Andrew E & Oswald, Andrew J, 1994. "Unhappiness and Unemployment," Economic Journal, Royal Economic Society, vol. 104(424), pages 648-659, May.
    6. Andrew E. Clark, 2006. "A Note on Unhappiness and Unemployment Duration," Applied Economics Quarterly (formerly: Konjunkturpolitik), Duncker & Humblot, Berlin, vol. 52(4), pages 291-308.
    7. Bruno S. Frey & Alois Stutzer, 2002. "What Can Economists Learn from Happiness Research?," Journal of Economic Literature, American Economic Association, vol. 40(2), pages 402-435, June.
    8. Paul Frijters & John P. Haisken-DeNew & Michael A. Shields, 2004. "Money Does Matter! Evidence from Increasing Real Income and Life Satisfaction in East Germany Following Reunification," American Economic Review, American Economic Association, vol. 94(3), pages 730-740, June.
    9. Korpi, Tomas, 1997. "Is utility related to employment status? Employment, unemployment, labor market policies and subjective well-being among Swedish youth," Labour Economics, Elsevier, vol. 4(2), pages 125-147, June.
    10. Andrew Clark & Yannis Georgellis & Peter Sanfey, 2001. "Scarring: The Psychological Impact of Past Unemployment," Economica, London School of Economics and Political Science, vol. 68(270), pages 221-241, May.
    11. Liliana Winkelmann & Rainer Winkelmann, 1998. "Why Are the Unemployed So Unhappy?Evidence from Panel Data," Economica, London School of Economics and Political Science, vol. 65(257), pages 1-15, February.
    12. Gary Chamberlain, 1980. "Analysis of Covariance with Qualitative Data," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 47(1), pages 225-238.
    13. Ada Ferrer-i-Carbonell & Paul Frijters, 2004. "How Important is Methodology for the estimates of the determinants of Happiness?," Economic Journal, Royal Economic Society, vol. 114(497), pages 641-659, July.
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    unemployment; scarring; happiness; life satisfaction;
    All these keywords.

    JEL classification:

    • J28 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Safety; Job Satisfaction; Related Public Policy
    • J60 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - General
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making

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