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Fear of Unemployment

Student: Chernova Daria

Supervisor: Andrey Aistov

Faculty: Faculty of Economics

Educational Programme: Economics (Master)

Year of Graduation: 2016

The fact that perception matters has been widely recognised in economic literature. Although this fact is usually referred to in macroeconomics, the concept is still applicable to the microeconomic research and labour economics in particular. The paper is focused on analyzing the interrelation between the fear of unemployment and individual decisions made by the economic agents operating in the labour market. The scientific significance of the research lies in the attempt to reveal the connection between the individual’s perception and his or her economic behavior. The results obtained by the research can be used by the policy-makers in order to improve the economic situation in the labour market as well as create better conditions for both the individuals and enterprises. The paper contains a review of the existing methodology aimed at measuring and evaluating the fear of unemployment, which implies both job insecurity and employability, as well as the study of existing literature on the labour market models. Within the framework of the inquiry equilibrium search model is put under scrutiny because its features allow the researchers to estimate the unemployment duration taking into consideration the heterogeneity of economic agents. In the empirical part of the study the latter model is estimated by the means of two-stage procedure suggested by Bontemps et al. (2000). The estimates analysis revealed the ∩-shaped dependency between the parameters responsible for search duration for the employed and unemployed and job insecurity. However, the interrelation between the estimates of search duration and the employability as perceived by the worker tends to be negative, even though it revealed a slight increase in the duration for the individuals who have medium fear of not finding a new job. It should be underlined that a more precise and varied scale would allow a more thorough investigation of the interrelation.

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