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Endogenously time-varying heterogeneity in unemployment expectations: A discrete choice approach in an agent-based modeling

Author

Listed:
  • Julia de Sousa Pinheiro

  • Jaylson Jair da Silveira

  • Gilberto Tadeu Lima

Abstract

This paper investigates the complex interplay between the dynamics of heterogeneous unemployment expectations across working households and observed unemployment dynamics. Drawing on considerable survey evidence that documents the persistent heterogeneity in households` unemployment expectations and its coevolution with observed unemployment, we develop an agent-based modeling (ABM) that incorporates a heterogeneous expectations-augmented efficiency wage mechanism. The time evolution of unemployment expectations is endogenized by means of a discrete choice protocol, allowing their frequency distribution across households to change endogenously over time and coevolve with observed unemployment. By integrating economic dynamics modeling with survey-based data, the simulated model reproduces qualitatively salient empirical regularities, including self-sustaining and coevolving cyclical fluctuations in both the heterogeneity in working households` expectations regarding unemployment and observed unemployment.

Suggested Citation

  • Julia de Sousa Pinheiro & Jaylson Jair da Silveira & Gilberto Tadeu Lima, 2026. "Endogenously time-varying heterogeneity in unemployment expectations: A discrete choice approach in an agent-based modeling," Working Papers, Department of Economics 2026_11, University of São Paulo (FEA-USP).
    • Handle: RePEc:spa:wpaper:2026wpecon11
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    JEL classification:

    • C02 - Mathematical and Quantitative Methods - - General - - - Mathematical Economics
    • 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
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search

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