Unemployment Narratives

Abstract

We study economic narratives---causal accounts of observed events---in a high-stakes real-world setting: long-term unemployment. We conduct surveys with Danish job seekers, firm managers, households from the general population, and experts at labor market institutions as well as international academic experts and measure narratives using open-ended questions. We document three main results. First, there is pronounced heterogeneity in narratives both within and across samples. For instance, job seekers are more likely to attribute long-term unemployment to factors outside the control of the individual and less likely to blame worker motivation than respondents in the other samples. Second, narratives strongly reflect job seekers' personal experiences during the current and previous unemployment spells. Third, narratives shape job seekers' and firm managers' quantitative beliefs, decisions and labor market outcomes as measured in survey and linked administrative data, which we demonstrate correlationally and in a field experiment. Our findings highlight the experiential origins of economic narratives and their key role in driving important economic behaviors. Joint work with Robert Mahlstedt and Johannes Wohlfart.