Unhappiness and Job Finding

It is puzzling that people feel unhappy when they become unemployed, while simultaneously active labour market policies are needed to bring them back to work. We investigate this using GSOEP data. We find that nearly half of the unemployed do not experience a drop in happiness, which might explain why activation is sometimes needed. Furthermore, even though unhappy unemployed search more actively for a job, it does not speed up their job finding. Apparently, there is no link between unhappiness and job finding rate. Hence there is no contradiction between the unemployed being unhappy and the need for activation policies.