Working Paper: NBER ID: w31940
Authors: Qiwei He; Philipp Kircher
Abstract: This study documents how job seekers update perceived job-finding prospects by unemployment duration and by learning about aggregate unemployment. We find that job seekers perceive an 18% decline in their job-finding probability for each additional month of unemployment, but perceive a higher job-finding probability when the aggregate unemployment rate is unexpectedly low. We develop a job search model with learning and updating to quantify the impact of perceived aggregate unemployment on subjective job-finding probabilities, revealing an overreaction to news about aggregate conditions. These beliefs can potentially offset a non-trivial part of the negative consequences of moral hazard in job search.
Keywords: Job Search; Beliefs; Expectations; Unemployment
JEL Codes: D83; E24; J64
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| perceived job-finding probabilities (J68) | unemployment duration (J64) |
| aggregate unemployment rates (J64) | perceived job-finding probabilities (J68) |
| aggregate unemployment rates unexpectedly low (J64) | perceived job-finding probabilities (J68) |
| aggregate unemployment dynamics (J64) | individual job-finding expectations (J68) |
| aggregate surprise about unemployment rate (E24) | individual job-finding probability assessments (J68) |