Robert Mahlstedt, Department of Economics, UCPH


“Subjective Expectations, Complexity and the Effectiveness of Public Policy”

 

Abstract
Unemployment insurance systems in modern labor markets are riddled with a multitude of rules and regulations governing job seekers’ economic situation and incentives. In this context, subjective expectations play an important for the individual decision-making. The talk presents results from two studies analyzing how biased perceptions about labor market policies can distort individual incentives and long-run labor market outcomes. First, based on a novel combination of German survey and register data, it is shown that participants in human capital intensive training programs who do not anticipate a treatment face substantially lower employment rates than their participating counterparts who expect to participate ex ante. The effect is robust with respect to various sources of unobserved heterogeneity and can be explained by the fact that individuals who do not expect to participate invest too little effort into the preparation of the treatment, e.g. they do not search for the optimal program provider. Second, we conduct a large-scale field experiment in the Danish labor market, in which we exogenously vary individuals’ understanding and perceptions of labor market policies by providing them real-time personalized information about their current UI benefit situation and related job search incentives. We study the causal impact of our intervention on individual job search behavior and subsequent labor market outcomes.

 

Contact person: Jakob Roland Munch