Job Seekers' Perceptions and Employment Prospects: Heterogeneity, Duration Dependence and Bias
Johannes Spinnewijn () and
Giorgio Topa ()
No 25294, NBER Working Papers from National Bureau of Economic Research, Inc
This paper analyses job seekers' perceptions and their relationship to unemployment outcomes to study heterogeneity and duration dependence in both perceived and actual job finding. Using longitudinal data from two comprehensive surveys, we document that elicited beliefs are (1) strongly predictive of actual job finding, (2) subject to an optimistic bias that is larger for the long-term unemployed, and (3) not revised downward when job seekers remain unemployed. We exploit the joint observation of beliefs and ex-post realizations, to disentangle heterogeneity and duration dependence in true job finding rates. To this purpose, we estimate non-parametric bounds as well as a reduced-form statistical framework that allows for elicitation errors and systematic biases in beliefs. We find a substantial amount of heterogeneity in true job finding rates, accounting for most of the observed decline in job finding rates over the spell of unemployment. We also find that job seekers' beliefs systematically under-react to these differences in job finding rates. We show theoretically and quantify in a calibrated model of job search how these biased beliefs contribute to the slow exit out of unemployment and can explain more than 10 percent of the incidence of long-term unemployment.
JEL-codes: E24 J6 J64 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-lab and nep-mac
Note: EFG LS
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9) Track citations by RSS feed
Published as Andreas I. Mueller & Johannes Spinnewijn & Giorgio Topa, 2021. "Job Seekers' Perceptions and Employment Prospects: Heterogeneity, Duration Dependence, and Bias," American Economic Review, American Economic Association, vol. 111(1), pages 324-363, January.
Downloads: (external link)
Journal Article: Job Seekers' Perceptions and Employment Prospects: Heterogeneity, Duration Dependence, and Bias (2021)
Working Paper: Job seekers’ perceptions and employment prospects: heterogeneity, duration dependence, and bias (2021)
Working Paper: Job Seekers' Perceptions and Employment Prospects: Heterogeneity, Duration Dependence and Bias (2019)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:nbr:nberwo:25294
Ordering information: This working paper can be ordered from
Access Statistics for this paper
More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().