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Re-employment Expectations and the Eye of Providence

Sonja C. Kassenboehmer and Sonja G. Schatz
Authors registered in the RePEc Author Service: Sonja Cornelia de New

No 697, SOEPpapers on Multidisciplinary Panel Data Research from DIW Berlin, The German Socio-Economic Panel (SOEP)

Abstract: Using a nationally representative panel dataset, this study investigates the extent and impact of systematic misconceptions of the currently unemployed concerning their statistical re-employment probability, affecting their labor market behavior in a sub-optimal way. Specifically, people with unemployment experience of 3 to 5 years significantly underestimate their objective re-employment probabilities as determined by the econometrician's all-seeing `Eye of Providence'. Simply having information concerning the individuals' previous unemployment experience is sufficient to make more accurate predictions than the individuals themselves. People who underestimate their re-employment probability are less likely to search actively for a job and indeed more likely to exit the labor force. If re-employed, they are more likely to accept lower wages, work fewer hours, work part-time and experience lower levels of job satisfaction. This information can be used by employment agency case workers to counsel clients better and prevent client adverse behavior and outcomes.

Keywords: Job Insecurity; Re-employment Expectations; Prediction Errors (search for similar items in EconPapers)
JEL-codes: J64 J01 D84 (search for similar items in EconPapers)
Pages: 52 p.
Date: 2014
New Economics Papers: this item is included in nep-lab and nep-lma
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Citations: View citations in EconPapers (1) Track citations by RSS feed

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