Unemployment, Life Satisfaction and Retrospective Error

Abstract

Summary The paper compares current and 1-year retrospective data on unemployment in the German Socio-Economic Panel study. 13% of all unemployment spells are not reported 1 year later, and another 7% are misreported. The ratio of retrospective to current unemployment has increased in recent years and is related to salience of unemployment measures such as the loss of life satisfaction that is associated with unemployment. Individuals with weak labour force attachment, e.g. women with children or individuals who are close to retirement, have the greatest propensity to under-report unemployment retrospectively. The data are consistent with evidence on retrospective bias found by cognitive psychologists and survey methodologists.