Well-being, unemployment, and social interaction: An international comparison

Abstract

If unemployment is high in an individual's reference group, the moral imperative to work for one's own living may be weakened. Consequently, the psychic costs of unemployment and work incentives are reduced. In this paper, we empirically test this proposition using a survey conducted in almost all European countries. Marginal effects calculated from ordered probit regressions pooled over countries suggest that this effect is present, at least for high levels of well-being. Evidence from individual countries is more mixed. We also consider the effect of the benefit replacement ratio and employment protection on the well-being of the unemployed.