Unemployment Where Does It Hurt

We investigate how individual well being is a ected by unemployment An alyzing German panel data on life satisfaction we nd that unemployment has a large and negative e ect for male individuals The e ect is large enough to increase the probability that a mid aged male is dissatis ed by more than percentage points We decompose the total well being costs of unemployment and nd that for males at least two thirds are non pecuniary while at most one third are pecuniary costs One implication is that the bene ts of employment generating policies exceed the bene ts of policies that are designed to mitigate the e ects of unemployment through income transfers This research was supported by The German Marshall Fund of the United States We thank Andrew Oswald Art Goldsmith and two anonymous referees for helpful comments Fax e mail r winkelmann econ canterbury ac nz