Original article

IZA Journal of Labor Policy

, 1:2

First online:

Open Access This content is freely available online to anyone, anywhere at any time.

Notes on behavioral economics and labor market policy

  • Linda BabcockAffiliated withH. John Heinz III School of Public Policy and Management, Carnegie Mellon University
  • , William J CongdonAffiliated withBrookings Institution
  • , Lawrence F KatzAffiliated withDepartment of Economics, Harvard University Email author 
  • , Sendhil MullainathanAffiliated withDepartment of Economics, Harvard University


Labor market policies succeed or fail at least in part depending on how well they reflect or account for behavioral responses. Insights from behavioral economics, which allow for realistic deviations from standard economic assumptions about behavior, have consequences for the design and functioning of labor market policies. We review key implications of behavioral economics related to procrastination, difficulties in dealing with complexity, and potentially biased labor market expectations for the design of selected labor market policies including unemployment compensation, employment services and job search assistance, and job training.


Behavioral economics Unemployment insurance Job training Job search JEL D03 D04 J08 J24 J64 J65