Abstract
We extend the happiness literature on the welfare costs of inflation and unemployment by looking at age and job market characteristics. Our findings show that the relative welfare cost of unemployment versus inflation is higher than one, and much higher in intermediate age cohorts and in low job protection countries. The potential role of our findings in explaining the heterogeneous behaviour of CBs under different job market settings is discussed and compared with alternative explanations based on other institutional or structural differences in economies and in their reactions to shocks.