Over our lives, we face many risks and choices. Read new working paper from @mdenardi.bsky.social, @johanatch.bsky.social, Borella, & Yang for a life-cycle model w/ single and married individuals jointly choosing labor supply and savings from labor market entry until death
https://bit.ly/4anebZ5
Over our lives, we face many risks and choices. Read new working paper from @mdenardi.bsky.social, @johanatch.bsky.social, Borella, & Yang for a life-cycle model w/ single and married individuals jointly choosing labor supply and savings from labor market entry until death . https://bit.ly/4anebZ5
Showing how to identify models of earnings and employment dynamics from subjective expectations data, from Manuel Arellano, Orazio Attanasio, Margherita Borella, @mdenardi.bsky.social, and Gonzalo Paz-Pardo www.nber.org/papers/w35027
How expectations shape labor market decisions:
Subjective Earnings and Employment Dynamics by Manuel Arellano, Orazio Attanasio, Margherita Borella, @mdenardi.bsky.social & Gonzalo Paz-Pardo
www.rfberlin.com/wp-content/u...
Friends, I'll make @mdenardi.bsky.social 's words my own: Let's make the 19th PEJ Annual Meeting in Aveiro a great one. 3-5 July 2026. Submit your papers and please extend the invitation to all your relevant contacts. All relevant details and further updates here: www.ua.pt/en/pej2026
Reduced-form estimates can overstate persistence and volatility because they load on job transitions and sorting. Once we account for heterogeneity, volatility falls sharply and becomes much flatter across the earnings distribution.
Bottom line: high observed earnings persistence does not necessarily mean highly persistent of individual-level productivity shocks. A large part reflects heterogeneity and employer transitions.
Using the NY Fed Survey of Consumer Expectations, we observe expected earnings offers, the distribution of those offers, and the probability workers would accept them. That gives direct information on counterfactuals that realized outcomes alone do not.
How much of measured earnings risk is really individual-level productivity risk, and how much reflects sorting, job transitions, and heterogeneity?
We show that subjective expectations data help separate these forces.
Main result: we find less persistence and less volatility in individual productivity shocks than much of the earlier literature suggests, but more heterogeneity in ability and match quality.