Risk events and learning from error: when are assessments of the risk of unemployment revised?

Abstract

Data from the British Household Panel Study are used to investigate the effect of changes in personal circumstances on employed panel members' assessment of the risk of unemployment. Adverse personal changes (‘risk events’) are shown to increase the likelihood of people, who felt safe from unemployment, to re-assess their risk and to become risk ‘pessimists’ one year later. Similarly, panel members who initially feared they might lose their jobs re-assessed their risk and became risk ‘optimists,’ if they experienced a number of (positive) risk events. After controlling for risk events, ‘error of judgment,’ which measures the accuracy of the initial risk assessment, was only independently significant for panel members who had judged themselves to be safe from unemployment, but had nevertheless lost their jobs. Risk re-assessments among panel members who had initially felt their jobs were insecure were significantly influenced by the time passed since re-employment, often exceeding the survey period. Overal...