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Misperceptions of unemployment and individual labor market outcomes

Author

Listed:
  • Ana Rute Cardoso

    (Campus UAB)

  • Annalisa Loviglio

    (Campus UAB)

  • Lavinia Piemontese

    (Campus UAB)

Abstract

We analyze the impact of misperceptions of the unemployment rate on individual wages, using the European Social Survey. We follow a threefold strategy to tackle potential endogeneity problems, as the model includes the following: controls for worker’s ability, the regional unemployment rate, and country fixed effects. We estimate interval regression models. When subjective perceptions overstate the country unemployment rate, a one percentage point gap between the perceived and the actual rates reduces wages by 0.4 to 0.7 %. We discuss a potential mechanism. A pessimistic view of the labor market leads to concern over own employment prospects, lowering perceived bargaining power and reservation wages.

Suggested Citation

  • Ana Rute Cardoso & Annalisa Loviglio & Lavinia Piemontese, 2016. "Misperceptions of unemployment and individual labor market outcomes," IZA Journal of Labor Policy, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 5(1), pages 1-22, December.
    • Handle: RePEc:spr:izalpo:v:5:y:2016:i:1:d:10.1186_s40173-016-0069-6
    DOI: 10.1186/s40173-016-0069-6
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    References listed on IDEAS

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    Cited by:

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    2. 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.
    3. Chiara Binelli, 2019. "Employment and Earnings Expectations of Jobless Young Skilled: Evidence from Italy," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 145(1), pages 201-231, August.
    4. Johnny Runge & Nathan Hudson-Sharp, 2020. "Public Understanding of Economics and Economic Statistics," Economic Statistics Centre of Excellence (ESCoE) Occasional Papers ESCOE-OP-03, Economic Statistics Centre of Excellence (ESCoE).
    5. Casamassima, Alessia & Perdiguero Garcia, Jordi & Morone, Andrea, 2021. "Investigate the energy misperception for "Next Generation" in Italy: An online experiment," MPRA Paper 110637, University Library of Munich, Germany.
    6. Hu Sun & Yun Wang, 2019. "Do On-lookers See Most of the Game? Evaluating Job-seekers' Competitiveness of Oneself versus of Others in a Labor Market Experiment," Working Papers 2019-07-11, Wang Yanan Institute for Studies in Economics (WISE), Xiamen University.

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    More about this item

    Keywords

    Wage dispersion; Labor market tightness; Perceptions;
    All these keywords.

    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General

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