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Temporary Overpessimism: Job Loss Expectations Following a Large Negative Employment Shock

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  • Emmler, Julian

    (Humboldt University Berlin)

  • Fitzenberger, Bernd

    (Institute for Employment Research (IAB), Nuremberg)

Abstract

Job loss expectations were widespread among workers in East Germany after reunification with West Germany. Though experiencing a large negative employment shock, East German workers were still overpessimistic immediately after reunification with respect to their job risk. Over time, job loss expectations fell and converged to West German levels, which was driven by a stabilizing economic environment and by an adaptation of the interpretation of economic signals with workers learning to distinguish individual risk from firm level risk. In fact, conditional on actual job loss risk, East German workers quickly caught up to West Germans regarding the accuracy of job loss expectations.

Suggested Citation

  • Emmler, Julian & Fitzenberger, Bernd, 2021. "Temporary Overpessimism: Job Loss Expectations Following a Large Negative Employment Shock," IZA Discussion Papers 14149, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp14149
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    More about this item

    Keywords

    transition economies; expectations; job loss;
    All these keywords.

    JEL classification:

    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
    • J63 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Turnover; Vacancies; Layoffs
    • P20 - Political Economy and Comparative Economic Systems - - Socialist and Transition Economies - - - General

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