Worker Beliefs about Outside Options

Simon Jäger (), Christopher Roth, Nina Roussille () and Benjamin Schoefer
Additional contact information
Simon Jäger: Princeton University
Nina Roussille: MIT

No 14963, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: Workers wrongly anchor their beliefs about outside options on their current wage. In particular, low-paid workers underestimate wages elsewhere. We document this anchoring bias by eliciting workers' beliefs in a representative survey in Germany and comparing them to measures of actual outside options in linked administrative labor market data. In an equilibrium model, such anchoring can give rise to monopsony and labor market segmentation. In line with the model, misperceptions are particularly pronounced among workers in low-wage firms. If workers had correct beliefs, at least 10% of jobs, concentrated in low-wage firms, would not be viable at current wages.

Keywords: wages; beliefs; bias; monopsony; GSOEP; IAB (search for similar items in EconPapers)
JEL-codes: D91 E03 E24 J3 J31 J42 J6 (search for similar items in EconPapers)
Pages: 122 pages
Date: 2021-12
New Economics Papers: this item is included in nep-hrm, nep-lma and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

Published - published online in: Quarterly Journal of Economics, 10 January 2024

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Related works:
Journal Article: Worker Beliefs About Outside Options* (2024)
Working Paper: Worker Beliefs About Outside Options (2022)
Working Paper: Worker Beliefs about Outside Options (2022)
Working Paper: Worker Beliefs About Outside Options (2022)
Working Paper: Worker Beliefs About Outside Options (2021)
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