Recent research documents mounting evidence for sizable and persistent biases in individual labor market expectations. This paper incorporates subjective expectations into a general equilibrium labor market model and studies the implications of biased expectations for wage bargaining, vacancy...

We measure individual bias in labor market expectations in German survey data and find that workers on average significantly overestimate their individual probabilities to separate from their job when employed as well to find a job when unemployed. These biases vary significantly between...