Temporary Overpessimism: Job Loss Expectations Following a Large Negative Employment Shock

Julian Emmler () and Bernd Fitzenberger ()
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Julian Emmler: Humboldt University Berlin
Bernd Fitzenberger: Institute for Employment Research (IAB), Nuremberg

No 14149, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: Job loss expectations were widespread among workers in East Germany after reunification with West Germany. Though experiencing a large negative employment shock, East German workers were still overpessimistic immediately after reunification with respect to their job risk. Over time, job loss expectations fell and converged to West German levels, which was driven by a stabilizing economic environment and by an adaptation of the interpretation of economic signals with workers learning to distinguish individual risk from firm level risk. In fact, conditional on actual job loss risk, East German workers quickly caught up to West Germans regarding the accuracy of job loss expectations.

Keywords: transition economies; expectations; job loss (search for similar items in EconPapers)
JEL-codes: D84 J63 J64 P20 (search for similar items in EconPapers)
Pages: 48 pages
Date: 2021-02
New Economics Papers: this item is included in nep-lab
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Published - published in: Economics of Transition and Institutional Change, 2022, 30 (3), 621 - 661

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