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Subjective Unemployment Expectations and (Self-)Insurance

Author

Listed:
  • Ida Maria Hartmann

    (CEBI, University of Copenhagen)

  • Soeren Leth-Petersen

    (CEBI, University of Copenhagen)

Abstract

We study subjective unemployment expectations and their influence on economic behavior. We utilize a longitudinal data set combining survey elicited subjective unemployment expectations with administrative data on income, savings, and unemployment insurance. Our findings indicate that subjective expectations hold valuable predictive information about subsequent unemployment experiences. We find that individuals tend to overestimate their risk of unemployment. Moreover, higher unemployment expectations leads to a greater likelihood of enrolling in unemployment insurance and accumulation of liquid savings. Subjective unemployment expectations can thus help explain why people, who are observationally similar, make differently economic decisions.

Suggested Citation

  • Ida Maria Hartmann & Soeren Leth-Petersen, 2022. "Subjective Unemployment Expectations and (Self-)Insurance," CEBI working paper series 22-25, University of Copenhagen. Department of Economics. The Center for Economic Behavior and Inequality (CEBI).
    • Handle: RePEc:kud:kucebi:2225
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    File URL: https://www.econ.ku.dk/cebi/publikationer/working-papers/CEBI_WP_25-22.rev1.pdf
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    More about this item

    Keywords

    Unemployment expectations; belief updating; unemployment insurance; precautionary savings;
    All these keywords.

    JEL classification:

    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
    • G51 - Financial Economics - - Household Finance - - - Household Savings, Borrowing, Debt, and Wealth
    • G52 - Financial Economics - - Household Finance - - - Insurance

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