Individual misperception of labor market risk and macroeconomic outcomes
Labor market risk is a prevalent phenomenon that shapes the behavior of individuals with respect to a number of choices, including wage bargaining, consumption-savings allocations, job search, portfolio composition or human capital accumulation. Through its effect on individual behavior, labor market risk also has important consequences for aggregate outcomes such as employment, physical capital accumulation, wage growth and business cycles. In the literature, it is common to assume agents have rational expectations and correctly assess the risk they face in the labor market. In this project, we first investigate how accurately individuals can assess their own labor market risk in a detailed empirical analysis based on German household survey data from the GSOEP. This presentation will focus on our current empirical results: We find evidence for a significant degree of misperception of labor market risk among people of working age in Germany. In particular, employed workers are “pessimistic” regarding their job loss risk, while unemployed workers are “optimistic” regarding their job finding probability. We also find considerable differences in the degree of misperception across demographic groups (e.g. age, education, occupation, industry, region…) . In a next step of the project, we will analyze the implications of such misperception for individual as well as macroeconomic outcomes. We will do so within the framework of a quantitative macroeconomic model featuring incomplete markets, search-and-matching, and individual misperception of labor market risk. Toward the end of the presentation, we will briefly outline the plan for the macroeconomic analysis.”
We're looking forward to your participation!
This IHS seminar will take place online as an MS-Teams event. Interested parties can register by mail to event(at)ihs.ac.at and will receive a link to participate.
Susanne Forstner is senior researcher in the group „European Governance and Public Finance“. Her work focuses on public finance and labor markets from a quantitative macroeconomic perspective