Can information correct optimistic wage expectations? Evidence from Mozambican job-seekers

Sam Jones and Ricardo Santos

Journal of Development Economics, 2022, vol. 159, issue C

Abstract: Forward-looking expectations are central to job search but often inaccurate. To test whether public information can help correct beliefs, we embed an experiment in a longitudinal survey of Mozambican graduates. We quantify responses of own-earning expectations to information about peers’ current earnings, sent by SMS. Optimistic beliefs were revised downward by a larger margin in the treatment group. But, consistent with a theoretical on-the-job search model, responses to news do not conform to a linear updating framework, with strong evidence for limited responses to negative news. This explains the moderate impact of our intervention and why optimistic expectations remained persistent.

Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:eee:deveco:v:159:y:2022:i:c:s0304387822001298

DOI: 10.1016/j.jdeveco.2022.102987

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