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Wage Inequality, Reservation Wages and Labor Market Participation

Author

Listed:
  • Joachim Möller

    (Institute of Economics, University of Regensburg, Regensburg, Germany, joachim.moeller@wiwi.uni-regensburg.de)

  • Alisher Aldashev

    (Center for European Economic Research (ZEW), Mannheim, Germany, aldashev@zew.de)

Abstract

This article presents an analysis of the variation of gender-specific labor-market participation rates across regions. A search-theoretical model with intertemporal optimization behavior of agents suggests that a higher regional wage level fosters participation, whereas higher unemployment discourages workers. The authors extend the standard model by introducing two measures of dispersion, one for the spread below and one for the spread above the median. It is shown that wage dispersion in the lower tail of the distribution decreases the value of search and leads to lower participation rates, although the reverse is true for wage dispersion in the upper tail. These implications of the model are tested using spatial econometrics.

Suggested Citation

  • Joachim Möller & Alisher Aldashev, 2007. "Wage Inequality, Reservation Wages and Labor Market Participation," International Regional Science Review, , vol. 30(2), pages 120-151, April.
    • Handle: RePEc:sae:inrsre:v:30:y:2007:i:2:p:120-151
    DOI: 10.1177/0160017606298431
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Shoichi Sasaki, 2017. "Empirical analysis of the effects of increasing wage inequalities on marriage behaviors in Japan," Discussion Papers 1705, Graduate School of Economics, Kobe University.
    2. Lehmer, Florian & Ludsteck, Johannes, 2008. "The returns to job mobility and inter-regional migration," IAB-Discussion Paper 200806, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
    3. Bogdan-Constantin Ibanescu & Alexandra Gheorghiu & Mioara Cristea & Gabriela Carmen Pascariu, 2023. "The Evolution of Job Insecurity in Spatial Contexts in Europe During COVID-19 Pandemic," International Regional Science Review, , vol. 46(5-6), pages 552-576, September.
    4. Dolton, Peter & Bondibene, Chiara Rosazza & Stops, Michael, 2015. "Identifying the employment effect of invoking and changing the minimum wage: A spatial analysis of the UK," Labour Economics, Elsevier, vol. 37(C), pages 54-76.
    5. Sasaki, Shoichi, 2017. "Empirical analysis of the effects of increasing wage inequalities on marriage behaviors in Japan," Journal of the Japanese and International Economies, Elsevier, vol. 46(C), pages 27-42.
    6. repec:hum:wpaper:sfb649dp2010-054 is not listed on IDEAS
    7. Lottmann, Franziska, 2012. "Spatial dependencies in German matching functions," Regional Science and Urban Economics, Elsevier, vol. 42(1-2), pages 27-41.
    8. Giuseppe Arbia, 2011. "A Lustrum of SEA: Recent Research Trends Following the Creation of the Spatial Econometrics Association (2007--2011)," Spatial Economic Analysis, Taylor & Francis Journals, vol. 6(4), pages 377-395, July.
    9. Shoichi Sasaki, 2014. "An empirical analysis of the effect of increasing male wage inequality on female marriage behavior in Japan," Discussion Papers 1401, Graduate School of Economics, Kobe University.
    10. Michael Stops & Peter Dolton & Chiara Rosazza-Bondibene, 2012. "The Spatial Analysis of the Employment Effect of the Minimum Wage: Case of the UK 1999-2010," ERSA conference papers ersa12p225, European Regional Science Association.
    11. Möller Joachim & Tubadji Annie, 2009. "The Creative Class, Bohemians and Local Labor Market Performance: A Micro-data Panel Study for Germany 1975–2004," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 229(2-3), pages 270-291, April.
    12. Schulze, Franziska, 2010. "Spatial dependencies in German matching functions," SFB 649 Discussion Papers 2010-054, Humboldt University Berlin, Collaborative Research Center 649: Economic Risk.

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