Evolutionary Persistence of Heterogeneity in Unemployment Expectations Across Workers in an Efficiency Wage Setting

Joao Luiz Toogood Pitta (), Jaylson Jair da Silveira () and Gilberto Lima

No 2026_01, Working Papers, Department of Economics from University of São Paulo (FEA-USP)

Abstract: Motivated by evidence of persistent heterogeneity in workers` unemployment expectations, this paper develops a novel evolutionary microdynamic of expectation formation and switching, embedded in an efficiency wage modeling of the labor market. The frequency distribution of unemployment expectations (and, consequently, of effort levels on the job) across employed workers is endogenously time-varying, driven by an evolutionary protocol based on satisficing reference dependence, and co-evolves with the economy-wide unemployment rate. The model features a fully polymorphic evolutionary equilibrium (optimistic, pessimistic, and neutral expectations coexist) that is both unique and locally asymptotically stable, consistent with the novel evidence offered in the paper that the frequency distribution of workers` unemployment expectations exhibits no discernible trend over extended periods.

Keywords: Unemployment; heterogeneous expectations; evolutionary dynamics; satisficing behavior; reference dependence (search for similar items in EconPapers)
JEL-codes: C73 D91 E71 (search for similar items in EconPapers)
Date: 2026-01-08
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