Unemployment and Subjective Well-Being – a question of entry-states?

This paper investigates if the entry state (i.e. labour market status prior
to unemployment) mediates the effect of unemployment on subjective
well-being. The hypotheses leading the analysis are set by extensions of
Jahoda’s theory on the five needs fulfilled by employment (1982) and Fryers
theory on man’s need for control (1986). The two theories predict different
patterns of mediation. I use the first 14 waves of the BHPS, and analyse the
data using a random effects ordered probit model. In the analysis I find
significant differences between the sufferings of unemployed with different
entry states. Those suffering the most are the self-employed with and
without employees, and to some surprise, those suffering the least – who
actually gain from becoming unemployed – are the full-time students. The
hierarchy of suffering found in the analysis somewhat reinforces the
hypothesis set by the Fryer-perspective. However, some of the coefficients
found in the analysis cannot be explained by either this or the Jahoda
perspective, which suggests that also other mechanisms than the ones focused
on in these two theories play a role.