By examining the impact of labor market policies on employees' perceptions of job security, this dissertation seeks to understand the mechanisms through which formal institutions generate confidence and positive expectations among individuals regarding their economic future. The following questions guide my research: Does dismissal protection give employees confidence in the continuity of their jobs? Do unemployment benefits increase employees' confidence of finding a new job and reduce their worries about job loss? In addition to the intended consequences, I also explore the unintended effects of labor market policies. Specifically, I ask: Does the presence of temporary employees affect perceived job security? To what degree do temporary workers mediate the effects of other policies? In the first empirical analysis, I apply multilevel-modeling techniques to a dataset that I created by merging large-scale survey data from individuals in 20 countries with macro-level information from various data sources. The second empirical analysis involves in-depth interview data collected from employees at one German and one American university. The quantitative data allow me to identify associations between national-level policies and perceptions across a large sample of countries, and the qualitative data help me to meaningfully interpret and supplement these results. My main finding is that perceptions are not always congruent with economic and institutional facts. Organizational characteristics and individual differences seem to be more relevant than national-level policies to how workers feel about their jobs. The second important finding is that the effects of policies vary depending on their design. Formal institutions that reduce vulnerability by providing assurance (unemployment benefits) and by establishing a comparison group with lower levels of protection (temporary workers) seem to be more effective in instilling confidence and positive expectations than those that increase the costs for unilateral breach of contract (dismissal protection). These findings are of theoretical importance in challenging the implicit rationality assumption that formal institutions always achieve their intended outcomes, an assumption which underlies the bulk of comparative research on welfare states and national production systems. They are also of practical relevance, as they can help to inform the development of labor market policies and organizational measures intended to increase workers' sense of job security.