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Assesses how past unemployment affects life satisfaction through future insecurity, suggesting a terminological shift.
We reassess the ‘scarring’ hypothesis which states that unemployment experienced in the past reduces a person's current life satisfaction even after the person has become reemployed. Our results suggest that the scar from past unemployment operates via worsened expectations of becoming unemployed in the future, and that it is future insecurity that makes people unhappy. Hence the terminology should be altered by one letter: past unemployment ‘scars’ because it ‘scares’.
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Knabe et al. (2009) studied this question.
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