TY  - UNPD
A1  - Grunow, Martina
T1  - Reference-dependent effects of unemployment on mental well-being
N2  - Several contributions to the literature have shown that the perception of the individual employment status depends on the surrounding unemployment rate. We argue that expectations are a possible link between unemployment rates and the individual employment status regarding changes in mental well-being. Theoretical foundation comes from models for reference-dependent preferences with endogenous reference points. We provide a simple theoretical model to motivate and structure the empirical analysis. Using data from the German Socio-Economic Panel, we estimate a pairwise interacted model for employment status and expectations over two time periods. Life satisfaction is used as a proxy for mental well-being. To identify a causal effect of unemployment, expectations and their interactions on mental well-being, the analysis relies on fixed effects and exogenous entries into unemployment due to plant closures. We confirm the standard result that unemployment has a negative effect on mental well-being. Furthermore, the results deliver empirical evidence for reference-dependent effects of unemployment on mental well-being. We find that becoming unemployed unexpectedly is more severe as if the unemployment was expected. Therefore, this paper contributes to the understanding of how mental well-being is affected by unemployment and delivers empirical support for the theoretical models of reference-dependent preference wit endogenous reference points determined by expectations.
T3  - Volkswirtschaftliche Diskussionsreihe - 323 
KW  - JEL: C23, D03, D84, I10, I18, J01, J60
Y1  - 2020
UR  - https://opus.bibliothek.uni-augsburg.de/opus4/frontdoor/index/index/docId/71094
UR  - https://nbn-resolving.org/urn:nbn:de:bvb:384-opus4-710942
PB  - Volkswirtschaftliches Institut, Universität Augsburg
CY  - Augsburg
ER  -