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Can Workers' Increased Pessimism about the Labor Market Conditions Raise Unemployment?

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  • Jaylson Jair da Silveira
  • Gilberto Tadeu Lima

Abstract

As there is evidence on persistent heterogeneity in unemployment expectations across workers, it is a reasonable premise that the expected cost of job loss and the provision of effort on the job are also heterogeneous across workers. Based on such premise, we show that the positive correlation between pessimistic unemployment expectations and actual unemployment which is observed with survey data can arise in a heterogeneous expectations-augmented efficiency wage model through a composition effect which is empirically testable.

Suggested Citation

  • Jaylson Jair da Silveira & Gilberto Tadeu Lima, 2019. "Can Workers' Increased Pessimism about the Labor Market Conditions Raise Unemployment?," Working Papers, Department of Economics 2019_38, University of São Paulo (FEA-USP).
    • Handle: RePEc:spa:wpaper:2019wpecon38
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    More about this item

    Keywords

    Labor market conditions; unemployment expectations; unemployment rate;
    All these keywords.

    JEL classification:

    • E1 - Macroeconomics and Monetary Economics - - General Aggregative Models
    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs
    • J6 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers

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