Maximilian Blesch

 Working papers

Robust decision-making under risk and ambiguity
with Philipp Eisenhauer

Abstract: Economists often estimate economic models on data and use the point estimates as a stand-in for the truth when studying the model’s implications for optimal decision-making. This practice ignores model ambiguity, exposes the decision problem to misspecification, and ultimately leads to post-decision disappointment. Using statistical decision theory, we develop a framework to explore, evaluate, and optimize robust decision rules that explicitly account for estimation uncertainty. We show how to operationalize our analysis by studying robust decisions in a stochastic dynamic investment model in which a decision-maker directly accounts for uncertainty in the model’s transition dynamics.

Biased Wage Expectations and Female Labor Supply
with Philipp Eisenhauer, Peter Haan, Boryana Ilieva, Annekatrin Schrenker, Georg Weizsäcker

Abstract: We quantify the effects of biased wage expectations on female labor market outcomes. A wide sample of full-time and part-time employees report counterfactual predictions about their own wage trajectories in future full-time and part-time employment, revealing severe misperceptions. Actual wage growth occurs almost exclusively in full-time work, whereas it is close to zero in part-time work, as we show with reduced-form regressions and in a structural life-cycle model. Subjective expectations, however, predict a mild difference in the opposite direction, with strong over-optimism about the returns to part-time experience. We leverage the structural model to quantify how employee beliefs influence their labor supply, earnings and welfare over the life cycle. The bias increases part-time employment strongly, induces flatter long-run wage profiles, and substantially influences the employment effects of a widely discussed policy reform, the introduction of joint taxation. The most significant impact of the bias appears for college-educated women, consistent with the large difference between expected and realized wages observed for this group.