A05: Behavioral determinants of inequalities in labour market

In this project, we investigate how inequalities emerge, are reinforced or diminished in the labor market. We focus on inequalities that arise during job search, at the hiring stage and at the workplace, and study whether these inequalities can be traced to biases, bounded rationality and heterogeneity in skills, personality and preferences. We then assess how objective and perceived inequality determines labor market behavior, well-being and health.

The research is mainly empirical in nature. We collect and analyze experimental data, personnel data, survey data, administrative data, and linkages of these. Important data sources are data collected from hiring and admission processes, newly merged administrative data from the Integrated Employment Biographies (IEB) and the German Socio-Economic Panel (SOEP), data from the Swiss unemployment insurance records, as well as data that we will collect through field experiments and surveys.

Our empirical approach builds on theoretical insights and previous empirical findings from different strands of the economics literature as well as literature in psychology and sociology. The research program is structured in three interrelated work packages.

In the first work package, we focus on the job search process. We examine in particular whether and how constraints — related for example to information, family structure or labor market institutions — and worker characteristics, such as skills, preferences, character traits and beliefs, shape the job search behavior of unemployed workers. We then study how job search behavior affects labor market prospects and realized employment opportunities. Our analysis aims at generating insights for the design of policies that effectively improve labor market outcomes of unemployed workers.

In the second work package, we analyze how inequalities can arise at the hiring stage. We zoom in on the process through which firms and organizations assess candidates. The analysis aims at identifying sources of biases and heuristics which potentially distort subjective assessments and can lead to an unequal treatment of candidates. We thereby inform policies and interventions that aim at increasing the equality of opportunity in hiring and admission situations.

The third work package studies the emergence and consequences of inequalities at the workplace. Research in this work package investigates how skills, character traits and preferences that are largely formed prior to labor market entry contribute to wage inequality through differential job mobility and career advancement. We then assess how inequality at the workplace affects employment relationships, studying, for example, how perceived inequality and fairness perceptions are related to job satisfaction, turnover decisions and (mental) health.