Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/305640 
Year of Publication: 
2024
Series/Report no.: 
IZA Discussion Papers No. 17198
Publisher: 
Institute of Labor Economics (IZA), Bonn
Abstract: 
We study the accuracy of job seekers' wage expectations by comparing subjective beliefs to objective benchmarks using linked administrative and survey data. Our findings show that especially job seekers with low objective earnings potential and those predicted to face a penalty compared to their pre-unemployment wage display overly optimistic wage expectations. Moreover, wage optimism is amplified by increased job search incentives and job seekers with overoptimistic wage expectations tend to overestimate their reemployment chances. We discuss the labor market implications of wage optimism, as well as the role of information frictions and motivated beliefs as sources of overoptimism.
Subjects: 
subjective expectations
objective benchmarks
job search
unemployment
reemployment wages
JEL: 
D83
D84
J64
Document Type: 
Working Paper

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