AbstractsEconomics

This thesis examines the labor market effects of incomplete information about workers' own job-finding process and best occupations fitting to them. Search outcomes convey information about workers' job finding abilities and appropriate occupations suited to them, and workers use this information to infer their types. This learning process generates endogenous heterogeneity in occupational choices and workers beliefs. Our theory explains how unemployment can affect labor market decisions including the occupational choices. Characterization results in a simple value function with reservation level of prior belief property that is similar to reservation wage property. Some interesting facts about both micro and macro data are identified and our model's explanation of these facts is discussed. In particular, our characterization gives rational for why workers with less experience in searching have (1) longer unemployment duration and (2) higher probability of changing occupation by reemployment, and (3) why shifts in Beveridge curve may be observed. Theory can also be used to (4) explain the discouraged worker phenomenon.