Advancement to Candidacy Presentation: “How Much Can I Make? Insights on Belief Updating in the Labor Market”, Sebastian Brown

Speaker

Sebastian Brown, University of California, Santa Barbara

Biography

Sebastian is a PhD student in Economics at the University of California, Santa Barbara. His research interests
include Labor, Personnel, and Behavioral Economics. He is currently investigating topics related to job search, labor
demand, and worker welfare. His most recent work seeks to better understand how individuals update their
beliefs about future wage offers in the labor market.

Event Details

Sebastian will be presenting his Advancement to Candidacy paper, “How Much Can I Make? Insights on Belief
Updating in the Labor Market”. To access the Advancement paper, you must have an active UCSB NetID and
password.

Abstract and JEL Codes

We use a nationally representative survey (the labor supplement of the Survey of Consumer Expectations) to study
individuals’ behavioral biases in learning about their wage distributions. Using a recently developed test for
Bayesianism (Augenblick and Rabin, 2021), we find strong evidence of non-Bayesian learning. Among respondents
who responded at least twice to the survey, we find an average movement in beliefs that is roughly 543% of the
reduction in their beliefs’ uncertainty, 443% more than the Bayesian benchmark, a result consistent with base-rate
neglect and/or overreaction to signals. This estimate remains large and significant when examining subsets of the
data separated by different labor market and demographic variables. We further examine the heterogeneity in
agents’ learning by identifying specific non-Bayesian patterns that can be explained by multiple priors’ models and
updating rules that accommodate asymmetric updating.

JEL Codes: D83, D84, D90, J64