Happier people are less likely to be unemployed: Evidence from longitudinal data in the United States and Germany

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Date and Time: 
Thursday, September 8, 2016
12:00 pm – 1:00 pm

A one standard deviation improvement in lagged subjective well-being (SWB) is associated with more than a one-percentage point reduction in the probability of being unemployed in the United States during the Great Recession, and a similar but smaller relationship is found in Germany. Results are based on dynamic and fixed-effects regressions using SWB residuals. SWB residuals represent higher or lower SWB than would be predicted by typical controls including employment status, income, and fixed effects. They are often interpreted as relating to character skills, which is supported with the use of the Big-Five personality traits. Changes in the Big-Five (e.g. neuroticism and extraversion) are associated with changes in residual SWB (within person). Residual SWB is also shown to be comparable with cognitive ability for predicting wages. The data come from the U.S. General Social Survey Panel (2006-2014) and German Socio-Economic Panel (1984-2013).