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The effects of savings on reservation wages and search effort

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  • Lammers, Marloes

Abstract

This paper discusses the interrelations among wealth, reservation wages and search effort. A theoretical job search model predicts wealth to affect reservation wages positively, and search effort negatively. Subsequently, reduced form equations for reservation wages and search intensity take these theoretical results to the data. The data used is a Dutch panel, containing detailed information on individual wealth and income, subjective reservation wages and proxies for search effort. The main empirical results show that wealth has a significantly positive effect on reservation wages of both household heads and spouses, and a significantly negative effect on the search effort of household heads.

Suggested Citation

  • Lammers, Marloes, 2014. "The effects of savings on reservation wages and search effort," Labour Economics, Elsevier, vol. 27(C), pages 83-98.
    • Handle: RePEc:eee:labeco:v:27:y:2014:i:c:p:83-98
    DOI: 10.1016/j.labeco.2014.03.001
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    References listed on IDEAS

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    1. Rendon Sílvio, 2006. "Job Search And Asset Accumulation Under Borrowing Constraints ," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 47(1), pages 233-263, February.
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    3. Rasmus Lentz & Torben Tranas, 2005. "Job Search and Savings: Wealth Effects and Duration Dependence," Journal of Labor Economics, University of Chicago Press, vol. 23(3), pages 467-490, July.
    4. Jeremy Lise, 2006. "On-the-Job Search and Precautionary Savings: Theory and Empirics of Earnings and Wealth Inequality," 2006 Meeting Papers 137, Society for Economic Dynamics.
    5. Mark E. Schweitzer, 2003. "Ready, willing, and able? measuring labour availability in the UK," Working Papers (Old Series) 0303, Federal Reserve Bank of Cleveland.
    6. Gabriella Berloffa & Peter Simmons, 2003. "Unemployment Risk, Labour Force Participation and Savings," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 70(3), pages 521-539.
    7. Blundell, Richard & Magnac, Thierry & Meghir, Costas, 1997. "Savings and Labor-Market Transitions," Journal of Business & Economic Statistics, American Statistical Association, vol. 15(2), pages 153-164, April.
    8. 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.
    9. 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.
    10. Avery, Robert B & Kennickell, Arthur B, 1991. "Household Saving in the U.S," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 37(4), pages 409-432, December.
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    12. Louise Sheiner & David N. Weil, 1992. "The Housing Wealth of the Aged," NBER Working Papers 4115, National Bureau of Economic Research, Inc.
    13. Lentz, Rasmus & Tranæs, Torben, 2005. "Marriage, Wealth, and Unemployment Duration: A Gender Asymmetry Puzzle," IZA Discussion Papers 1607, Institute of Labor Economics (IZA).
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    15. Mortensen, Dale T. & Pissarides, Christopher A., 1999. "New developments in models of search in the labor market," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 39, pages 2567-2627, Elsevier.
    16. Calmfors, Lars & Lang, Harald, 1995. "Macroeconomic Effects of Active Labour Market Programmes in a Union Wage-Setting Model," Economic Journal, Royal Economic Society, vol. 105(430), pages 601-619, May.
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    Cited by:

    1. Bransch, Felix, 2021. "Job search intensity of unemployed workers and the business cycle," Economics Letters, Elsevier, vol. 205(C).
    2. Zahra Murad & Robert Dowell, 2020. "Foreign visa salary requirement and natives’ reservation wages," Working Papers in Economics & Finance 2020-06, University of Portsmouth, Portsmouth Business School, Economics and Finance Subject Group.
    3. Stephen B. DeLoach & Mark Kurt, 2018. "On-the-Job Search, Mismatch and Worker Heterogeneity," Journal of Labor Research, Springer, vol. 39(2), pages 219-233, June.

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    More about this item

    Keywords

    Search; Reservation wages; Wealth; Consumption smoothing;
    All these keywords.

    JEL classification:

    • C30 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - General
    • C36 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Instrumental Variables (IV) Estimation
    • D01 - Microeconomics - - General - - - Microeconomic Behavior: Underlying Principles
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search

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