Ida Maria Hartmann defends her PhD thesis at the Department of Economics

Candidate:

Ida Maria Hartmann, Department of Economics, University of Copenhagen

Title:

Perceived Uncertainty and Economic Behavior

Supervisors:

• Søren Leth-Petersen, Professor, Department of Economics, University of Copenhagen
• Claus Thustrup Kreiner, Professor, Department of Economics, University of Copenhagen

Assessment Committee:

• Mette Ejnæs, Professor, Department of Economics, University of Copenhagen
• Jonas Maibom, Associate Professor, Department of Economics and Business Economics, Aarhus University
• Pamela Giustinelli, Associate Professor, Department of Economics and Management, University of Padova

Summary:

Economic life is inherently uncertain, yet individuals differ markedly in how they perceive and respond to this uncertainty. This dissertation investigates how subjective perceptions of risk and unpredictability shape economic behavior and contribute to inequality over the life course. The first two chapters examine how individuals form and update expectations about unemployment risk and how these beliefs influence financial decisions and labor market behavior, while the third chapter studies how perceived childhood unpredictability predicts later educational outcomes. Combining survey-elicited beliefs with rich administrative data, the dissertation highlights how perceptions of uncertainty are formed, revised, and translated into behavior. Overall, it demonstrates that subjective uncertainty is a central mechanism linking environments, beliefs, and persistent differences in economic outcomes.

Chapter 1: Subjective Unemployment Expectations and (Self-)Insurance

with Søren Leth-Petersen

In this chapter, we study subjective unemployment expectations and their influence on economic behavior. We utilize a longitudinal data set combining survey elicited subjective unemployment expectations with administrative data on income, savings, and unemployment insurance. Our findings indicate that subjective expectations hold valuable predictive information about subsequent unemployment experiences. We find that individuals tend to overestimate their risk of unemployment. Moreover, higher unemployment expectations lead to a greater likelihood of enrolling in unemployment insurance and accumulation of liquid savings.

Chapter 2: Subjective Unemployment Expectations and Precautionary Behavior in the Shadow of Peer Job Loss

In this chapter, I examine whether individuals’ subjective unemployment expectations and self-insurance behavior are related to unemployment experiences within their social networks. Using survey-elicited expectations combined with Danish administrative data, I document three main findings. First, peer job loss strongly predicts individuals’ future unemployment risk, even after controlling for fixed effects and prior outcomes, suggesting that peer unemployment reflects latent labor market conditions. Second, subjective unemployment expectations respond to recent unemployment among peers, particularly for individuals with little personal experience. Third, peer job loss exposure is associated with precautionary behavior, including higher take-up of private unemployment insurance and increased transitions to lower-turnover jobs.

Chapter 3: When Childhood Feels Unpredictable: Educational Consequences of Early-Life Instability

with Andrew Caplin, Nora Harhen, Cate Hartley, Søren Leth-Petersen, and Johan Sæverud

In this chapter, we propose that perceived unpredictability captures a common latent dimension through which diverse, adverse childhood experiences shape academic outcomes. Using a nationally representative survey of young adults in Denmark linked to population-wide administrative data, we study how perceived childhood unpredictability affects educational attainment, distinguishing between objectively measured childhood disruptions and the child's experience of unpredictability. While several individual disruptions are negatively associated with educational outcomes when examined in isolation, their explanatory power diminishes once they are modeled jointly. In contrast, perceived unpredictability strongly predicts poorer academic performance and remains a robust predictor after controlling for levels of resources and a rich set of administratively recorded childhood disruptions. Our findings suggest that how predictable childhood life feels to the child captures an underlying dimension of early-life environments that helps explain the persistence of educational inequality.

An electronic copy of the dissertation can be requested here: lema@econ.ku.dk