Unhappiness and Job Finding

It is puzzling that people feel quite unhappy when they become unemployed, while at thesame time active labor market policies are needed to bring unemployed back to work morequickly. Using data from the German Socio-Economic Panel, we investigate whether there isindeed such a puzzle. First, we find that nearly half of the unemployed do not experience adrop in happiness, which might explain why at least some workers need to be activated. Inaddition to that, we find that even though unemployed who experience a drop in happinesssearch more actively for a job, it does not speed up their job finding. Apparently, there is nolink between unhappiness and the speed of job finding. Hence, there is no contradictionbetween unemployed being unhappy and the need for activation policies...