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Can workers’ increased pessimism about the labor market conditions raise unemployment?

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  • Silveira, Jaylson Jair da
  • Lima, Gilberto Tadeu

Abstract

As there is extensive survey evidence on persistent heterogeneity in unemployment expectations across workers, it is a reasonable premise that the expected cost of job loss and the resulting provision of effort on the job are similarly heterogeneous across workers. Based on such a premise, the paper shows that the significant positive correlation between pessimistic unemployment expectations and actual unemployment which is consistently observed with household survey data can arise in a novel heterogeneous expectations-augmented efficiency wage modelling of the labor market through a composition effect.

Suggested Citation

  • Silveira, Jaylson Jair da & Lima, Gilberto Tadeu, 2021. "Can workers’ increased pessimism about the labor market conditions raise unemployment?," International Review of Economics & Finance, Elsevier, vol. 72(C), pages 125-134.
    • Handle: RePEc:eee:reveco:v:72:y:2021:i:c:p:125-134
    DOI: 10.1016/j.iref.2020.10.024
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    More about this item

    Keywords

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

    JEL classification:

    • C60 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - General
    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • E70 - Macroeconomics and Monetary Economics - - Macro-Based Behavioral Economics - - - General

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