Subjective Unemployment Expectations and (Self-)Insurance

Ida Maria Hartmann and Søren Leth-Petersen
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Ida Maria Hartmann: CEBI, University of Copenhagen

No 22-25, CEBI working paper series from University of Copenhagen. Department of Economics. The Center for Economic Behavior and Inequality (CEBI)

Abstract: We study subjective unemployment expectations and their influence on economic behavior. We utilize a longitudinal data set combining survey elicited subjective unemployment expectations with administrative data on income, savings, and unemployment insurance. Our findings indicate that subjective expectations hold valuable predictive information about subsequent unemployment experiences. We find that individuals tend to overestimate their risk of unemployment. Moreover, higher unemployment expectations leads to a greater likelihood of enrolling in unemployment insurance and accumulation of liquid savings. Subjective unemployment expectations can thus help explain why people, who are observationally similar, make differently economic decisions.

Keywords: Unemployment expectations; belief updating; unemployment insurance; precautionary savings (search for similar items in EconPapers)
JEL-codes: D83 D84 G51 G52 (search for similar items in EconPapers)
Pages: 47
Date: 2022-12-27
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Persistent link: https://EconPapers.repec.org/RePEc:kud:kucebi:2225

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