Updating about Yourself by Learning about the Market: The Dynamics of Beliefs and Expectations in Job Search

Qiwei He and Philipp Kircher

No 31940, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This study documents how job seekers update perceived job-finding prospects by unemployment duration and by learning about aggregate unemployment. We find that job seekers perceive an 18% decline in their job-finding probability for each additional month of unemployment, but perceive a higher job-finding probability when the aggregate unemployment rate is unexpectedly low. We develop a job search model with learning and updating to quantify the impact of perceived aggregate unemployment on subjective job-finding probabilities, revealing an overreaction to news about aggregate conditions. These beliefs can potentially offset a non-trivial part of the negative consequences of moral hazard in job search.

JEL-codes: D83 E24 J64 (search for similar items in EconPapers)
Date: 2023-12
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