New Measures of the Costs of Unemployment: Evidence from the Subjective Well-Being of 2.3 Million Americans

John F. Helliwell, Haifang Huang

NBER Working Paper No. 16829
Issued in February 2011
NBER Program(s):   EFG   LS   PE

By exploiting two very large samples of US subjective well-being data we are able to obtain comparable estimates of the monetary and other costs of unemployment on the unemployed themselves, while simultaneously estimating the effects of local employment on the subjective well-being of the rest of the population.

For those who are unemployed, the subjective well-being consequences can be divided into income and non-income effects, with the latter being five times larger than the former. This is similar to what has been found in many countries, as is our finding that the non-income effects are lower for individuals living in areas of high unemployment.

Most importantly, we are able to use the large sample size and variety of questions in the BRFSS and Gallup daily polls to reconcile, and extend to the United States, what had previously seemed to be contradictory results on the size and nature of the spillover effects of unemployment on subjective well-being. At the population level the spillover effects are twice as large as the direct effects, making the total well-being costs of unemployment fifteen times larger than those directly due to the lower incomes of the unemployed.

You may purchase this paper on-line in .pdf format from SSRN.com ($5) for electronic delivery.

An online appendix is available for this publication.

Acknowledgments

Machine-readable bibliographic record - MARC, RIS, BibTeX