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You're Fired! The Causal Negative Effect of Entry Unemployment on Life Satisfaction*


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     The authors thank Thomas K. Bauer, Jan Brenner, Andrew Clark, Anette Fasang, Martin Kroh, Simon Luechinger, Steve Machin, Anna Raute, Christoph M. Schmidt, Michael A. Shields, Rainer Winkelmann, Nicolas Ziebarth and two anonymous referees for very helpful comments.


This article examines the impact of unemployment for men and women on life satisfaction for Germany 1991–2006 using the German Socio-Economic Panel. We find that for women in east and west Germany, company closures in the year of entry into unemployment produce strongly negative effects on life satisfaction over and above an overall effect of unemployment, providing prima facie evidence of reduced outside work options, large investments in firm-specific human capital or a family constraint. The large compensating variation in terms of income indicates enormous non-pecuniary negative effects for women of exogenous entry unemployment due to company closures.