Misperceptions of unemployment and individual labor market outcomes

Ana Rute Cardoso, Annalisa Loviglio and Lavinia Piemontese
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Lavinia Piemontese: Campus UAB

IZA Journal of Labor Policy, 2016, vol. 5, issue 1, 1-22

Abstract: Abstract We analyze the impact of misperceptions of the unemployment rate on individual wages, using the European Social Survey. We follow a threefold strategy to tackle potential endogeneity problems, as the model includes the following: controls for worker’s ability, the regional unemployment rate, and country fixed effects. We estimate interval regression models. When subjective perceptions overstate the country unemployment rate, a one percentage point gap between the perceived and the actual rates reduces wages by 0.4 to 0.7 %. We discuss a potential mechanism. A pessimistic view of the labor market leads to concern over own employment prospects, lowering perceived bargaining power and reservation wages.

Keywords: Wage dispersion; Labor market tightness; Perceptions (search for similar items in EconPapers)
JEL-codes: D80 J31 (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (7)

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DOI: 10.1186/s40173-016-0069-6

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