Using data from the German Socio-Economic Panel from 1984-2009, we follow persons from their working life into their retirement years and find that, on average, employed people maintain their life satisfaction upon retirement, while long-term unemployed people report a substantial increase in...

Previous studies find that past unemployment reduces life satisfaction even after reemployment for non-monetary reasons (unemployment scarring). It is not clear, however, whether this scarring is only caused by employment-related factors, such as worsened working conditions, or increased future...

Economic models of climate policy (or policies to combat other environmental problems) typically neglect psychological adaptation to changing life circumstances. People may adapt or become more sensitive, to different degrees, to a deteriorated environment. The present paper addresses these...

This paper employs social identity and self-categorization theories as a useful heuristic framework through which to learn more about the nature of the misery experienced by the unemployed; in economic terms, the individual cost of unemployment. Utilizing this framework, the paper provides...

We use the differences between life satisfaction and emotional well-being of employed and unemployed persons to analyze how a person’s employment status affects cognitive well-being. Our results show that unemployment has a negative impact on cognitive, but not on affective well-being, which...

Adaptation is omnipresent but people systematically fail to correctly anticipate the degree to which they adapt. This leads individuals to make inefficient intertemporal decisions. This paper concerns optimal income taxation to correct for such anticipation-biases in a framework where consumers...

We apply the Day Reconstruction Method to compare unemployed and employed people with respect to their subjective assessment of emotional affects, differences in the composition and duration of activities during the course of a day, and their self-reported life satisfaction. Employed persons are...

We show that a minimum wage introduced in the presence of asymmetric information about worker productivities will lead to lower unemployment levels than predicted by the standard labour market model with heterogeneous labour and symmetric information.

Using data from the 2006 wave of the German Socio-Economic Panel (GSOEP), this paper analyzes how a minimum wage affects employment, wage inequality, public expenditures, and aggregate income in the low-wage sector. It is shown that a statutory minimum wage of EUR 7.50 per hour would cost...

According to the existing literature, capital taxes should not be imposed in the presence of optimal profit taxation in either unionised or competitive labour markets. We show that this conclusion does not hold for an economy with both competitive and unionised sectors, where the competitive...