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Evolutionary Persistence of Heterogeneity in Unemployment Expectations Across Workers in an Efficiency Wage Setting

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  • Joao Luiz Toogood Pitta

  • Jaylson Jair da Silveira

  • Gilberto Tadeu Lima

Abstract

Motivated by evidence of persistent heterogeneity in workers` unemployment expectations, this paper develops a novel evolutionary microdynamic of expectation formation and switching, embedded in an efficiency wage modeling of the labor market. The frequency distribution of unemployment expectations (and, consequently, of effort levels on the job) across employed workers is endogenously time-varying, driven by an evolutionary protocol based on satisficing reference dependence, and co-evolves with the economy-wide unemployment rate. The model features a fully polymorphic evolutionary equilibrium (optimistic, pessimistic, and neutral expectations coexist) that is both unique and locally asymptotically stable, consistent with the novel evidence offered in the paper that the frequency distribution of workers` unemployment expectations exhibits no discernible trend over extended periods.

Suggested Citation

  • Joao Luiz Toogood Pitta & Jaylson Jair da Silveira & Gilberto Tadeu Lima, 2026. "Evolutionary Persistence of Heterogeneity in Unemployment Expectations Across Workers in an Efficiency Wage Setting," Working Papers, Department of Economics 2026_01, University of São Paulo (FEA-USP).
    • Handle: RePEc:spa:wpaper:2026wpecon1
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    JEL classification:

    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • E71 - Macroeconomics and Monetary Economics - - Macro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on the Macro Economy

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