Subjective Earnings and Employment Dynamics

Manuel Arellano, Orazio Attanasio, Margherita Borella, Mariacristina De Nardi and Gonzalo Paz-Pardo
Additional contact information
Orazio Attanasio: Yale University

No 2509, Cowles Foundation Discussion Papers from Cowles Foundation for Research in Economics, Yale University

Abstract: We develop a new approach to estimating earnings, job, and employment dynamics using subjective expectations data from the NY Fed Survey of Consumer Expectations. These data provide beliefs about future earnings offers and acceptance probabilities, offering direct information on counterfactual outcomes and enabling identification under weaker assumptions. Our framework avoids biases from selection and unobserved heterogeneity that affect models using realized outcomes. First-step fixed-effects regressions identify risk, persistence, and transition effects; second-step GMM recovers the covariance structure of unobserved heterogeneities such as ability, mobility, and match quality. We find lower risk and persistence of the individual productivity component than in prior work, but greater heterogeneity in ability and match quality. Simulations show that reduced-form estimates overstate persistence and volatility on individual-level productivity due to job transitions and sorting. After accounting for heterogeneity, volatility declines and becomes flat across the earnings distribution. These results underscore the value of expectations data.

Pages: 70 pages
Date: 2026-03-01
New Economics Papers: this item is included in nep-edu and nep-ltv
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://cowles.yale.edu/sites/default/files/2026-03/d2509.pdf (application/pdf)

Related works:
Working Paper: Subjective Earnings and Employment Dynamics (2026)
Working Paper: Subjective Earnings and Employment Dynamics (2026)
Working Paper: Subjective Earnings and Employment Dynamics (2026)
Working Paper: Subjective Earnings and Employment Dynamics (2026)
Working Paper: Subjective Earnings and Employment Dynamics (2026)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cwl:cwldpp:2509

Ordering information: This working paper can be ordered from
Cowles Foundation, Yale University, Box 208281, New Haven, CT 06520-8281 USA
The price is None.

Access Statistics for this paper

More papers in Cowles Foundation Discussion Papers from Cowles Foundation for Research in Economics, Yale University Yale University, Box 208281, New Haven, CT 06520-8281 USA. Contact information at EDIRC.
Bibliographic data for series maintained by Brittany Ladd ().