https://macropaperwarehouse.com/authors/georg-duernecker/Georg DuerneckerHugo -- gohugo.ioen-ushttps://macropaperwarehouse.com/papers/biased-expectations-and-labor-market-outcomes-evidence-from-german-survey-data-and-implications-for-the-eastwest-wage-gap/https://macropaperwarehouse.com/papers/biased-expectations-and-labor-market-outcomes-evidence-from-german-survey-data-and-implications-for-the-eastwest-wage-gap/<p><strong>Research question.</strong> The paper asks two questions: (1) How do workers&rsquo; biased expectations about job finding and job separation shape the labor market equilibrium and wages? (2) Are differences in expectation biases across workers a quantitatively important driver of wage differentials, specifically the East–West German wage gap?</p> <p><strong>Data.</strong> The empirical analysis uses the German Socio-Economic Panel (SOEP), a nationally representative longitudinal survey of approximately 30,000 participants per wave. The working-age sample (ages 25–65) covers nine biennial survey waves from 1999 to 2015, yielding 67,772 observations for job separation expectations and 6,423 for job finding expectations. Perceived transition probabilities are reported on a 0–100 scale in steps of 10 percentage points. Actual (statistical) transition probabilities are constructed by estimating probit models that predict realized transitions within 24 months using a rich set of individual, job, and employer characteristics, and are rounded to the nearest decile for consistency with the survey scale.</p>