Great expectations: Past wages and unemployment durations

René Böheim, Gerard Horvath and Rudolf Winter-Ebmer

Labour Economics, 2011, vol. 18, issue 6, 778-785

Abstract: Decomposing wages into worker and firm wage components, we find that firm-fixed components are sizeable parts of workers' wages. If workers can only imperfectly observe the extent of firm-fixed components in their wages, they might be misled about the overall wage distribution. Such misperceptions may lead to unjustified high reservation wages, resulting in overly long unemployment durations. We examine the influence of previous wages on unemployment durations for workers after exogenous lay-offs and, using Austrian administrative data, we find that younger workers are, in fact, unemployed longer if they profited from high firm-fixed components in the past. We interpret our findings as evidence for overconfidence generated by imperfectly observed productivity.

Keywords: Unemployment; Job search; Overconfidence (search for similar items in EconPapers)
JEL-codes: J3 J6 (search for similar items in EconPapers)
Date: 2011
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

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Related works:
Working Paper: Great Expectations: Past Wages and Unemployment Durations (2010)
Working Paper: Great Expectations: Past Wages and Unemployment Durations (2010)
Working Paper: Great Expectations: Past Wages and Unemployment Durations (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:labeco:v:18:y:2011:i:6:p:778-785

DOI: 10.1016/j.labeco.2011.06.009

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