Marc Witte (VU Amsterdam): ''Feedback, Overconfidence and Job Search Behavior''

Abstract:
Job seekers face uncertainty about their abilities, and whether these match with job requirements. Such uncertainty may result in sub-optimal job search outcomes and job matches. We conduct a field experiment among job seekers in Addis Ababa, Ethiopia. Participants underwent a skill assessment and were asked about their willingness to pay (WTP) for information about their relative performance on a test of general intelligence. WTP is positive for about 80 percent of the population, and is associated with gender and personality. Feedback provision leads individuals to update their beliefs which only persists for individuals with low WTP. We provide evidence that suggests imperfect recall as potential mechanism for the lack of persistence. Feedback increases job search intensity but relatively lower for initially overconfident individuals and those with negative or zero WTP, which results in lower realized wages for these groups. The heterogeneity in belief updating, recall and job search behavior is consistent with some overconfident job seekers being unable to forget information and, thus, to maintain motivated beliefs, but being sophisticated about this inability to forget.