Wage Expectations and Job Search

Abstract

In a field experiment with 9,000 Danish job seekers, we study how unemployed workers’ wage expectations affect job search and re-employment. In our survey, we generate exogenous variation in respondents’ wage expectations by informing a random half of them about re-employment wages of comparable workers. The intervention increases job-finding as measured in administrative data for both initially optimistic and initially pessimistic respondents, but through different channels: initial optimists lower their reservation wages and intensify search, while pessimists raise reservation wages and redirect applications toward local vacancies. Consistent with spatial search frictions, narrowing the geographic scope accelerates job finding among pessimists.