Does the unemployment rate moderate the well-being disadvantage of the unemployed? Within-region estimates from the European Social Survey

Abstract

Using pooled cross-sectional data (eight waves of the European Social Survey), this work analysed how the regional unemployment rate influences the well-being disadvantages of the unemployed. We estimate region fixed effects and slopes models that, unlike the standard region fixed effects approach, provide an unbiased estimate of the cross-level interaction term (between being unemployed and the unemployment rate) in the absence of unobserved time-variant confounders. The results show that the satisfaction disadvantage of the unemployed (relative to the employed) is larger when the regional unemployment rate is higher. Smaller and insignificant differences were found regarding happiness. These results are in line with the argument that worse re-employment perspectives in high-unemployment regions may be particularly harmful to unemployed people. These results do not contradict the claim that, in regions with a weaker social norm to work, unemployed people may be more satisfied. Instead, they suggest that the unemployment rate does not reflect the social norm to work.