The Accuracy of Job Seekers' Wage Expectations

Marco Caliendo, Robert Mahlstedt (), Aiko Schmeißer () and Sophie Wagner
Additional contact information
Robert Mahlstedt: University of Copenhagen
Aiko Schmeißer: University of Potsdam
Sophie Wagner: University of Potsdam

No 17198, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: We study the accuracy of job seekers' wage expectations by comparing subjective beliefs to objective benchmarks using linked administrative and survey data. Our findings show that especially job seekers with low objective earnings potential and those predicted to face a penalty compared to their pre-unemployment wage display overly optimistic wage expectations. Moreover, wage optimism is amplified by increased job search incentives and job seekers with overoptimistic wage expectations tend to overestimate their reemployment chances. We discuss the labor market implications of wage optimism, as well as the role of information frictions and motivated beliefs as sources of overoptimism.

Keywords: subjective expectations; objective benchmarks; job search; unemployment; reemployment wages (search for similar items in EconPapers)
JEL-codes: D83 D84 J64 (search for similar items in EconPapers)
Pages: 52 pages
Date: 2024-08
New Economics Papers: this item is included in nep-lab and nep-ltv
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Working Paper: The Accuracy of Job Seekers' Wage Expectations (2024)
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