Behavioral Economics, Nudging, and Labor Market Performance
In recent years, a growing body of research in psychology and economics has demonstrated that individual behavior does not only depend on economic incentives and constraints, but instead is influenced by a multitude of psychological factors as well as by individual limitations in self-control, cognition, and attention. These findings have profoundly shaped the way in which economists and psychologists think about public policy. In particular, they have led to a new approach to policy-making that directly applies insights from behavioral economics for the development and systematic evaluation of novel policy instruments.
Since human decision making is ubiquitous in labor markets, labor-market policy is one of the key policy areas where the use of behavioral insights may fundamentally enhance market outcomes. Against this background, we build up a research unit located at the Economics Department of the University of Copenhagen consisting of core members with strong expertise in behavioral economics, labor economics, experimental and behavioral economics and register data analysis.
The research unit will closely collaborate with the Ministry of Employment (Beskæftigelsesministeriet and STAR). In addition, the unit will work closely with an interdisciplinary research network consisting of local and international affiliates with expertise in the area of ‘Behavioral Economics, Psychology and the Labor Market’. The unique structure of the research unit will serve as a hub for knowledge exchange between the research community and policy makers in Denmark.
The main goal of the research unit is: To exploit new insights from psychology and behavioral economics to improve labor market prospects of individuals, functioning of labor market policy and overall labor market performance.
Achieving this ambitious goal is only possible by
(i) combining the expertise from different research areas (e.g. internet and field experiments as well as register data analysis) and
(ii) closely collaborating with the Ministry of Employment and STAR, making it possible to carry out large scale, representative experiments in the real world.
The research group will use an interdisciplinary research approach and a broad spectrum of complementary scientific methods to shed new light on a number of fundamental questions related to individuals’ job search behavior, their earnings and employment prospects, and aggregate labor market performance.
Topics that are studied - among others - include:
1. How do cognitive and behavioral biases hamper individuals’ employment and earnings’ prospects?
2. How to help people overcome these challenges, in order to speed up the job search process and improve the quality of resulting labor-market “matches”?
3. How to identify and best assist at-risk groups, in order to prevent them falling into long-term unemployment?
To address these questions, the research unit will apply a broad spectrum of complementary scientific methods. Specifically, the projects conducted in the research unit will make use of register data, laboratory and internet experiments, household surveys, as well as large-scale field experiments and randomized controlled trials. In its work, the unit will also heavily use the unique possibilities of linking experimental data from the lab, internet and field with Danish register data on individuals’ labor market outcomes. 3 All research questions will be studied in the specific Danish labor market context ensuring the relevance of the findings for the Ministry of Employment and STAR.Contact: Alexander Sebald Grant provider: The Ministry of EmploymentProject period: July 2016 - July 2019