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Updating about Yourself by Learning about the Market: The Dynamics of Beliefs and Expectations in Job Search

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  • Qiwei He
  • Philipp Kircher

Abstract

This study documents how job seekers update perceived job-finding prospects by unemployment duration and by learning about aggregate unemployment. We find that job seekers perceive an 18% decline in their job-finding probability for each additional month of unemployment, but perceive a higher job-finding probability when the aggregate unemployment rate is unexpectedly low. We develop a job search model with learning and updating to quantify the impact of perceived aggregate unemployment on subjective job-finding probabilities, revealing an overreaction to news about aggregate conditions. These beliefs can potentially offset a non-trivial part of the negative consequences of moral hazard in job search.

Suggested Citation

  • Qiwei He & Philipp Kircher, 2023. "Updating about Yourself by Learning about the Market: The Dynamics of Beliefs and Expectations in Job Search," NBER Working Papers 31940, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:31940
    Note: EFG LS TWP
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    More about this item

    JEL classification:

    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search

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