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Unemployment Benefits and Reservation Wages: Key Elasticities from a Stripped-Down Job Search Approach

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  • Pedro Portugal
  • John T. Addison

Abstract

This paper exploits survey information on reservation wages and data on actual wages from the European Community Household Panel to deduce in the manner of Lancaster and Chesher (1983) additional parameters of a stylized structural search model; specifically, reservation wage and transition/duration elasticities. The informational requirements of this approach are minimal, thereby facilitating comparisons between countries. Further, its policy content is immediate insofar as the impact of unemployment benefit rules and measures increasing the arrival rate of job offers are concerned. These key elasticities are computed for the United Kingdom and eleven other European nations.

Suggested Citation

  • Pedro Portugal & John T. Addison, 2008. "Unemployment Benefits and Reservation Wages: Key Elasticities from a Stripped-Down Job Search Approach," Working Papers w200803, Banco de Portugal, Economics and Research Department.
    • Handle: RePEc:ptu:wpaper:w200803
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    References listed on IDEAS

    as
    1. Addison, John T. & Centeno, Mario & Portugal, Pedro, 2004. "Reservation Wages, Search Duration, and Accepted Wages in Europe," IZA Discussion Papers 1252, Institute of Labor Economics (IZA).
    2. Devine, Theresa J. & Kiefer, Nicolas M., 1991. "Empirical Labor Economics: The Search Approach," OUP Catalogue, Oxford University Press, number 9780195059366.
    3. Lancaster, Tony & Chesher, Andrew, 1983. "An Econometric Analysis of Reservation Wages," Econometrica, Econometric Society, vol. 51(6), pages 1661-1676, November.
    4. Lynch, Lisa M, 1983. "Job Search and Youth Unemployment," Oxford Economic Papers, Oxford University Press, vol. 35(0), pages 271-282, Supplemen.
    5. Ridder, Geert & Gorter, Kees, 1986. "Unemployment Benefits And Search Behavior An Empirical Investigation," University of Amsterdam, Actuarial Science and Econometrics Archive 293113, University of Amsterdam, Faculty of Economics and Business.
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    Citations

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    Cited by:

    1. Tom Krebs, 2014. "Labor Market Reform and the Cost of Business Cycles," 2014 Meeting Papers 1017, Society for Economic Dynamics.
    2. Krebs, Tom & Scheffel, Martin, 2016. "Labor Market Institutions and the Cost of Recessions," IZA Discussion Papers 10442, Institute of Labor Economics (IZA).
    3. Pannenberg, Markus, 2007. "Risk Aversion and Reservation Wages," IZA Discussion Papers 2806, Institute of Labor Economics (IZA).
    4. Mário Centeno & Álvaro A. Novo, 2014. "Do Low-Wage Workers React Less to Longer Unemployment Benefits? Quasi-Experimental Evidence," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 76(2), pages 185-207, April.
    5. B. Contini & J. Ignacio Garcia Perez & T. Pusch & R. Quaranta, 2017. "New Approaches to the Study of Long Term Non-Employment Duration in Italy, Germany and Spain," Working Papers 2017-14, FEDEA.
    6. Brown, Sarah & Taylor, Karl, 2013. "Reservation wages, expected wages and unemployment," Economics Letters, Elsevier, vol. 119(3), pages 276-279.
    7. 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.
    8. 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.
    9. Talarowski, David, 2012. "Estimation des élasticités du modèle de recherche d'emploi sur données françaises [Estimation of the elasticities of the model of job search on French data]," MPRA Paper 38366, University Library of Munich, Germany.
    10. Sarah Brown & Karl Taylor, "undated". "Reservation Wages, Expected wages and the duration of Unemployment: evidence from British Panel data," Working Papers 2009001, The University of Sheffield, Department of Economics.
    11. Joanne Lee & Karen Needels & Walter Nicholson, "undated". "A Longitudinal Survey of Unemployment Insurance Recipients in Two Regions in California," Mathematica Policy Research Reports 982c8e2b780e479ea249e7b05, Mathematica Policy Research.
    12. Krebs, Tom & Scheffel, Martin, 2016. "Quantifizierung der gesamtwirtschaftlichen Effekte ausgewählter Reformvorschläge der Studie "Reforms, Investment and Growth: An Agenda for France, Germany and Europe"," Working Papers 16-04, University of Mannheim, Department of Economics.
    13. John Addison & Mário Centeno & Pedro Portugal, 2009. "Do Reservation Wages Really Decline? Some International Evidence on the Determinants of Reservation Wages," Journal of Labor Research, Springer, vol. 30(1), pages 1-8, March.
    14. Tom Krebs & Martin Scheffel, 2013. "Macroeconomic Evaluation of Labor Market Reform in Germany," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 61(4), pages 664-701, December.
    15. 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.
    16. Antonio Accetturo & Luigi Infante, 2013. "Skills or culture? An analysis of the decision to work by immigrant women in Italy," IZA Journal of Migration and Development, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 2(1), pages 1-21, December.
    17. 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.
    18. Martin Abraham & Katrin Auspurg & Sebastian Bähr & Corinna Frodermann & Stefanie Gundert & Thomas Hinz, 2013. "Unemployment and willingness to accept job offers: results of a factorial survey experiment [Arbeitslosigkeit und Stellenannahmebereitschaft: Erste Ergebnisse eines Faktoriellen Survey Moduls]," Journal for Labour Market Research, Springer;Institute for Employment Research/ Institut für Arbeitsmarkt- und Berufsforschung (IAB), vol. 46(4), pages 283-305, December.
    19. Mr. Tom Krebs & Mr. Martin Scheffel, 2013. "Macroeconomic Evaluation of Labor Market Reform in Germany," IMF Working Papers 2013/042, International Monetary Fund.
    20. Sarah Brown & Karl Taylor, 2008. "Expectations, Reservation Wages And Employment: Evidence From British Panel Data," Working Papers 2008007, The University of Sheffield, Department of Economics, revised May 2008.
    21. repec:wrk:warwec:991 is not listed on IDEAS
    22. Gutknecht, Daniel, 2012. "Do Reservation Wages Decline Monotonically? A Novel Statistical Test," Economic Research Papers 270635, University of Warwick - Department of Economics.
    23. Arni, Patrick, 2017. "What Drives Wage Effects of Unemployment Benefits? Evidence from Natural Experiments and Reservation Wage Data," VfS Annual Conference 2017 (Vienna): Alternative Structures for Money and Banking 168154, Verein für Socialpolitik / German Economic Association.
    24. Abraham, Martin & Auspurg, Katrin & Bähr, Sebastian & Frodermann, Corinna & Gundert, Stefanie & Hinz, Thomas, 2013. "Unemployment and willingness to accept job offers : results of a factorial survey experiment (Arbeitslosigkeit und Stellenannahmebereitschaft : Erste Ergebnisse eines Faktoriellen Survey Moduls)," Journal for Labour Market Research, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany], vol. 46(4), pages 283-305.

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    More about this item

    JEL classification:

    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
    • J65 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment Insurance; Severance Pay; Plant Closings

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