IDEAS home Printed from https://ideas.repec.org/p/eea/boewps/wp2014-8.html
   My bibliography  Save this paper

Determinants of reservation wages: empirical evidence for Estonia

Author

Listed:
  • Liina Malk

Abstract

This paper provides an empirical analysis of the individual and macroeconomic determinants of reservation wages with a particular focus on the influence of unemployment duration. Data from the Estonian Labour Force Survey 2011–2013 and instrumental variable regression analysis are used for estimating the determinants of reservation wages. The findings indicate that personal characteristics, the household’s income level and the regional unemployment rate are important factors that affect reservation wage setting. In addition, it appears that unemployment duration has a significant negative influence on the reservation wage, which is mainly driven by men and older individuals

Suggested Citation

  • Liina Malk, 2015. "Determinants of reservation wages: empirical evidence for Estonia," Bank of Estonia Working Papers wp2014-8, Bank of Estonia, revised 20 Jan 2015.
    • Handle: RePEc:eea:boewps:wp2014-8
    as

    Download full text from publisher

    File URL: http://www.eestipank.ee/sites/eestipank.ee/files/publication/en/WorkingPapers/2014/wp08_2014.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Kiefer, Nicholas M & Neumann, George R, 1979. "An Empirical Job-Search Model, with a Test of the Constant Reservation-Wage Hypothesis," Journal of Political Economy, University of Chicago Press, vol. 87(1), pages 89-107, February.
    2. Wolfgang Franz, 1980. "The Reservation Wage of Unemployed Persons in the Federal Republic of Germany: Theory and Empirical Tests," NBER Working Papers 0578, National Bureau of Economic Research, Inc.
    3. repec:bla:econom:v:56:y:1989:i:222:p:225-46 is not listed on IDEAS
    4. Christensen, Björn, 2002. "Reservation wages, offered wages, and unemployment duration: new empirical evidence," Kiel Working Papers 1095, Kiel Institute for the World Economy (IfW Kiel).
    5. Lancaster, Tony & Chesher, Andrew, 1983. "An Econometric Analysis of Reservation Wages," Econometrica, Econometric Society, vol. 51(6), pages 1661-1676, November.
    6. Alan B. Krueger & Andreas I. Mueller, 2016. "A Contribution to the Empirics of Reservation Wages," American Economic Journal: Economic Policy, American Economic Association, vol. 8(1), pages 142-179, February.
    7. John T. Addison & José A. F. Machado & Pedro Portugal, 2013. "The Reservation Wage Unemployment Duration Nexus," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 75(6), pages 980-987, December.
    8. Brown, Sarah & Roberts, Jennifer & Taylor, Karl, 2011. "The gender reservation wage gap: Evidence from British Panel data," Economics Letters, Elsevier, vol. 113(1), pages 88-91, October.
    9. Stephen R. G. Jones, 1988. "The Relationship Between Unemployment Spells and Reservation Wages as a Test of Search Theory," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 103(4), pages 741-765.
    10. Blackaby, D.H. & Latreille, P.L. & Murphy, P.D. & O'Leary, N.C. & Sloane, P.J., 2007. "An analysis of reservation wages for the economically inactive," Economics Letters, Elsevier, vol. 97(1), pages 1-5, October.
    11. Bloemen, Hans G & Stancanelli, Elena G F, 2001. "Individual Wealth, Reservation Wages, and Transitions into Employment," Journal of Labor Economics, University of Chicago Press, vol. 19(2), pages 400-439, April.
    12. Blien, Uwe & Messmann, Susanne & Trappmann, Mark, 2012. "Do reservation wages react to regional unemployment?," IAB-Discussion Paper 201222, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
    13. repec:hal:spmain:info:hdl:2441/9704 is not listed on IDEAS
    14. Fishe, Raymond P H, 1982. "Unemployment Insurance and the Reservation Wage of the Unemployed," The Review of Economics and Statistics, MIT Press, vol. 64(1), pages 12-17, February.
    15. Brown, Sarah & Taylor, Karl, 2013. "Reservation wages, expected wages and unemployment," Economics Letters, Elsevier, vol. 119(3), pages 276-279.
    16. E. Paul Durrenberger, 2012. "Labour," Chapters, in: James G. Carrier (ed.), A Handbook of Economic Anthropology, Second Edition, chapter 8, Edward Elgar Publishing.
    17. Hogan, V., 1999. "The Determinants of the Reservation Wage," Papers 99/16, College Dublin, Department of Political Economy-.
    18. Brown, Sarah & Taylor, Karl, 2011. "Reservation wages, market wages and unemployment: Analysis of individual level panel data," Economic Modelling, Elsevier, vol. 28(3), pages 1317-1327, May.
    19. Hogan, Vincent, 2004. "Wage aspirations and unemployment persistence," Journal of Monetary Economics, Elsevier, vol. 51(8), pages 1623-1643, November.
    20. Mr. Eswar S Prasad, 2003. "What Determines the Reservation Wages of Unemployed Workers? New Evidence From German Micro Data," IMF Working Papers 2003/004, International Monetary Fund.
    21. Christensen, Björn, 2001. "The Determinants of Reservation Wages in Germany Does a Motivation Gap Exist?," Kiel Working Papers 1024, Kiel Institute for the World Economy (IfW Kiel).
    22. repec:hal:wpspec:info:hdl:2441/9704 is not listed on IDEAS
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Hila Axelrad & Israel Luski & Miki Malul, 2017. "Reservation Wages and the Unemployment of Older Workers," Journal of Labor Research, Springer, vol. 38(2), pages 206-227, June.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Hila Axelrad & Israel Luski & Miki Malul, 2017. "Reservation Wages and the Unemployment of Older Workers," Journal of Labor Research, Springer, vol. 38(2), pages 206-227, June.
    2. Luz A. Florez & Ligia Alba Melo-Becerra & Carlos Esteban Posada, 2021. "Estimating the reservation wage across city groups in Colombia: A stochastic frontier approach," Borradores de Economia 1163, Banco de la Republica de Colombia.
    3. Panos Sousounis & Gauthier Lanot, 2022. "Minimum Wage Effects on Reservation Wages," Journal of Labor Research, Springer, vol. 43(3), pages 415-439, December.
    4. Sarah Brown & Jennifer Roberts & Karl Taylor, 2010. "Reservation wages, labour market participation and health," Journal of the Royal Statistical Society Series A, Royal Statistical Society, vol. 173(3), pages 501-529, July.
    5. Brown, Sarah & Taylor, Karl, 2011. "Reservation wages, market wages and unemployment: Analysis of individual level panel data," Economic Modelling, Elsevier, vol. 28(3), pages 1317-1327, May.
    6. Mark Stater & Jeffrey B Wenger, 2017. "The Immediate Hardship of Unemployment: Evidence from the US Unemployment Insurance System," Eastern Economic Journal, Palgrave Macmillan;Eastern Economic Association, vol. 43(1), pages 17-36, January.
    7. Sarah Brown & Gurleen Popli & Alessandro Sasso, 2022. "Decomposing the gender reservation wage gap in Italy: A regional perspective," Journal of Regional Science, Wiley Blackwell, vol. 62(2), pages 499-540, March.
    8. Madhu Mohanty, 2005. "An alternative method of estimating the worker's reservation wage," International Economic Journal, Taylor & Francis Journals, vol. 19(4), pages 501-522.
    9. Pedro Portugal & John T. Addison, 2004. "Reservation Wages, Search Duration, and Accepted Wages in Europe," Working Papers w200413, Banco de Portugal, Economics and Research Department.
    10. John T. Addison & José A. F. Machado & Pedro Portugal, 2013. "The Reservation Wage Unemployment Duration Nexus," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 75(6), pages 980-987, December.
    11. Pannenberg, Markus, 2007. "Risk Aversion and Reservation Wages," IZA Discussion Papers 2806, Institute of Labor Economics (IZA).
    12. Christensen, Björn, 2001. "The Determinants of Reservation Wages in Germany Does a Motivation Gap Exist?," Kiel Working Papers 1024, Kiel Institute for the World Economy (IfW Kiel).
    13. Stephan Humpert & Christian Pfeifer, 2013. "Explaining age and gender differences in employment rates: a labor supply-side perspective [Eine Erklärung alters- und geschlechtsspezifischer Unterschiede in den Beschäftigungsquoten: Die Sicht de," Journal for Labour Market Research, Springer;Institute for Employment Research/ Institut für Arbeitsmarkt- und Berufsforschung (IAB), vol. 46(1), pages 1-17, March.
    14. Brown, Sarah & Taylor, Karl, 2013. "Reservation wages, expected wages and unemployment," Economics Letters, Elsevier, vol. 119(3), pages 276-279.
    15. Donald Haurin & Kala Sridhar, 2003. "The impact of local unemployment rates on reservation wages and the duration of search for a job," Applied Economics, Taylor & Francis Journals, vol. 35(13), pages 1469-1476.
    16. Nordlund, Madelende & Strandh, Mattias, 2014. "The relation between economic and non-economic incentives to work and employment chances among the unemployed," Working Paper Series 2014:23, IFAU - Institute for Evaluation of Labour Market and Education Policy.
    17. Katarzyna Budnik, 2012. "Do those who stay work less? On the impact of emigration on the measured TFP in Poland," NBP Working Papers 113, Narodowy Bank Polski.
    18. Sarah Brown & Karl Taylor, 2008. "Reservation Wages, Expected Wages and Labour Market Outcomes: Analysis of Individual Level Panel Data," Working Papers 2008008, The University of Sheffield, Department of Economics, revised Jul 2008.
    19. Mr. Eswar S Prasad, 2003. "What Determines the Reservation Wages of Unemployed Workers? New Evidence From German Micro Data," IMF Working Papers 2003/004, International Monetary Fund.
    20. Prasanna Tambe & Xuan Ye & Peter Cappelli, 2020. "Paying to Program? Engineering Brand and High-Tech Wages," Management Science, INFORMS, vol. 66(7), pages 3010-3028, July.

    More about this item

    Keywords

    unemployment; reservation wage; unemployment duration; instrumental variable regression;
    All these keywords.

    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eea:boewps:wp2014-8. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Peeter Luikmel (email available below). General contact details of provider: https://edirc.repec.org/data/epgovee.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.