We analyse the effect of income on mortality in Austria by using administrative social security data. To tackle potential
endogeneity concerns arising in this context, we estimate time invariant firm-specific wage components and use them as instruments
for actual wages. Although we find quantitatively small yet statistically significant effects in our naive least squares estimations,
instrumental variables regressions reveal a robust zero effect of income on 10-year death rates for workers aged 40 to 60
years, both in terms of coefficient magnitude and narrow width of confidence intervals. These results are robust to various
sample specifications and both linear and non-linear estimation methods.
Decomposing wages into worker and firm wage components, we find that firm-fixed components are sizeable parts of workers'
wages. If workers can only imperfectly observe the extent of firm-fixed components in their wages, they might be misled about
the overall wage distribution. Such misperceptions may lead to unjustified high reservation wages, resulting in overly long
unemployment durations. We examine the influence of previous wages on unemployment durations for workers after exogenous lay-offs
and, using Austrian administrative data, we find that younger workers are, in fact, unemployed longer if they profited from
high firm-fixed components in the past. We interpret our findings as evidence for overconfidence generated by imperfectly
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