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Reservation wages, offered wages, and unemployment duration: new empirical evidence

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  • Christensen, Björn

Abstract

This paper studies the reservation wages of unemployed persons and the wages offered them in Germany from 1987 to 1998, whereby special focus is placed on unemployment duration. The results of the study indicate that in contrast to reservation wages, offered wages decline considerably with duration of unemployment. This is the main reason that ratios of reserva­tion wages to offered wages increase rapidly with duration of unemploy­ment; on average, reservation wages begin to exceed offered wages after nine months of unemployment. Thus, the chance that long-term unem­ployed persons will receive a wage offer that is higher than their own reservation wage is extremely slight.

Suggested Citation

  • 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).
    • Handle: RePEc:zbw:ifwkwp:1095
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    References listed on IDEAS

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    1. Reinberg, Alexander, 1999. "Der qualifikatorische Strukturwandel auf dem deutschen Arbeitsmarkt : Entwicklungen, Perspektiven und Bestimmungsgründe," Mitteilungen aus der Arbeitsmarkt- und Berufsforschung, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany], vol. 32(4), pages 434-447.
    2. Enswar Prasad, 2001. "The Dynamics of Reservation Wages: Preliminary Evidence from the GSOEP," Vierteljahrshefte zur Wirtschaftsforschung / Quarterly Journal of Economic Research, DIW Berlin, German Institute for Economic Research, vol. 70(1), pages 44-50.
    3. White, Halbert, 1980. "A Heteroskedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity," Econometrica, Econometric Society, vol. 48(4), pages 817-838, May.
    4. Schneider, Hilmar & Fuchs, Olaf, 2000. "Anreizwirkungen der Arbeitslosenunterstützung auf die Arbeitssuche," Wirtschaft im Wandel, Halle Institute for Economic Research (IWH), vol. 6(11), pages 312-317.
    5. Heckman, James, 2013. "Sample selection bias as a specification error," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 31(3), pages 129-137.
    6. Projektgruppe Sozio-ökonomisches Panel, 1995. "Das Sozio-oekonomische Panel (SOEP) im Jahre 1994," Vierteljahrshefte zur Wirtschaftsforschung / Quarterly Journal of Economic Research, DIW Berlin, German Institute for Economic Research, vol. 64(1), pages 5-15.
    7. Guenter Lang, 2000. "Native-Immigrant Wage Differentials in Germany - Assimilation, Discrimination, or Human Capital?," Discussion Paper Series 197, Universitaet Augsburg, Institute for Economics.
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    Citations

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    Cited by:

    1. Bernhard Heitger & Jürgen Stehn, 2003. "Trade, Technical Change, and Labour Market Adjustment," The World Economy, Wiley Blackwell, vol. 26(10), pages 1481-1502, November.
    2. Christensen, Björn, 2003. "Selektionsverzerrungen, erfragte Reservationslöhne und Arbeitslosigkeitsdauer," Kiel Working Papers 1162, Kiel Institute for the World Economy (IfW Kiel).
    3. Schäfer, Holger, 2002. "Lohnversicherung: Ein Vorschlag zur Reform der Arbeitslosenversicherung," IW-Trends – Vierteljahresschrift zur empirischen Wirtschaftsforschung, Institut der deutschen Wirtschaft (IW) / German Economic Institute, vol. 29(3), pages 11-19.
    4. Horst Siebert, 2005. "Germany’s Stalling Economic Engine – How to Get it Running Again," De Economist, Springer, vol. 153(3), pages 243-255, September.
    5. Siebert, Horst, 2003. "The failure of the German labor market," Kiel Working Papers 1169, Kiel Institute for the World Economy (IfW Kiel).
    6. Bemjamin Villena-Roldan, 2009. "Aggregate Implications of Employer Search and Recruiting Selection," 2009 Meeting Papers 97, Society for Economic Dynamics.
    7. 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.

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    More about this item

    Keywords

    Reservation Wages; Offered Wages; Unemployment Duration; Labour Supply;
    All these keywords.

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply

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