Abstract

Standard job search theory assumes that unemployed individuals have perfect information about the effect of their search effort on the job offer arrival rate. We present an alternative model that assumes that each individual has a subjective belief about the impact of her search effort on the job arrival. These beliefs depend in part on an individual's locus of control. We estimate the impact of locus of control on job search behavior using a data set of newly unemployed individuals in Germany. Consistent with our theoretical predictions, we find evidence that individuals with an internal locus of control search more and that individuals who believe that their future outcomes are determined by external factors have lower reservation wages.

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