Endogenously time-varying heterogeneity in unemployment expectations: A discrete choice approach in an agent-based modeling

Julia de Sousa Pinheiro (), Jaylson Silveira () and Gilberto Lima

No 2026_11, Working Papers, Department of Economics from University of São Paulo (FEA-USP)

Abstract: This paper investigates the complex interplay between the dynamics of heterogeneous unemployment expectations across working households and observed unemployment dynamics. Drawing on considerable survey evidence that documents the persistent heterogeneity in households` unemployment expectations and its coevolution with observed unemployment, we develop an agent-based modeling (ABM) that incorporates a heterogeneous expectations-augmented efficiency wage mechanism. The time evolution of unemployment expectations is endogenized by means of a discrete choice protocol, allowing their frequency distribution across households to change endogenously over time and coevolve with observed unemployment. By integrating economic dynamics modeling with survey-based data, the simulated model reproduces qualitatively salient empirical regularities, including self-sustaining and coevolving cyclical fluctuations in both the heterogeneity in working households` expectations regarding unemployment and observed unemployment.

Keywords: Heterogeneous expectations; unemployment expectations; unemployment rate; discrete choice; agent-based modeling (search for similar items in EconPapers)
JEL-codes: C02 D84 E24 E70 J64 (search for similar items in EconPapers)
Date: 2026-03-30
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