Biased Wage Expectations and Female Labor Supply

Maximilian Blesch, Philipp Eisenhauer, Peter Haan, Boryana Ilieva, Annekatrin Schrenker and Georg Weizsäcker
Additional contact information
Maximilian Blesch: HU Berlin and DIW Berlin
Philipp Eisenhauer: Amazon
Peter Haan: FU Berlin and DIW Berlin
Boryana Ilieva: HU Berlin and DIW Berlin
Annekatrin Schrenker: FU Berlin and DIW Berlin

No 411, Rationality and Competition Discussion Paper Series from CRC TRR 190 Rationality and Competition

Abstract: Wage growth occurs almost exclusively in full-time work, whereas it is close to zero in part-time work. German women, when asked to predict their own potential wage outcomes, show severely biased expectations with strong over-optimism about the returns to part-time experience. We estimate a structural life-cycle model to quantify how beliefs influence labor supply, earnings and welfare over the life cycle. The bias increases part-time employment strongly, induces flatter long-run wage profiles, and substantially influences the employment effects of a widely discussed policy reform, the introduction of joint taxation. The most significant impact of the bias appears for college-educated women.

Keywords: returns to experience; biased beliefs; part-time work; dynamic life-cycle models (search for similar items in EconPapers)
JEL-codes: D63 H23 I24 I38 J22 J31 (search for similar items in EconPapers)
Date: 2023-07-27
New Economics Papers: this item is included in nep-dge, nep-eur and nep-lma
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Related works:
Working Paper: Biased Wage Expectations and Female Labor Supply (2024)
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Persistent link: https://EconPapers.repec.org/RePEc:rco:dpaper:411

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