John J. Conlon
1805 Cambridge St
Cambridge, MA 02138
Institutional Affiliation: Harvard University
NBER Working Papers and Publications
|September 2018||Labor Market Search With Imperfect Information and Learning|
with Laura Pilossoph, Matthew Wiswall, Basit Zafar: w24988
We investigate the role of information frictions in the US labor market using a new nationally representative panel dataset on individuals' labor market expectations and realizations. We find that expectations about future job offers are, on average, highly predictive of actual outcomes. Despite their predictive power, however, deviations of ex post realizations from ex ante expectations are often sizable. The panel aspect of the data allows us to study how individuals update their labor market expectations in response to such shocks. We find a strong response: an individual who receives a job offer one dollar above her expectation subsequently adjusts her expectations upward by $0.47. The updating patterns we document are, on the whole, inconsistent with Bayesian updating. We embed the em...