Crisis, unemployment and psychological wellbeing in Canada

Using longitudinal Canadian data, this paper explores the impact of unemployment on psychological wellbeing. To control for unobserved individual specific heterogeneity, this paper adopted sophisticated econometric techniques. The study suggests that unemployment has significant negative effect on psychological wellbeing and the paper finds that non-pecuniary costs of unemployment is much larger than the pecuniary costs associated with the loss of income while unemployed. The paper further finds that for individuals aged 15-54, being out of labor force also has adverse impact on psychological wellbeing. The study concludes that unemployment is more likely involuntary and thus in the face of unemployment, the policy makers need to use all possible ways to create jobs.