Reservation wages: explaining some puzzling regional patterns
AbstractWe use the Italian Labour Force Survey and the European Household Panel Survey to analyse the distribution of the reservation wages reported by jobseekers. In Italy, reservation wages appear to be higher in the South - the low income and high unemployment area of the country - than in the North and Centre. A similar, rather counterintuitive, pattern, however, can also be found in Finland, France and Spain. First, we show that the way in which these data are commonly collected generates double selection bias. Second, we show that this bias has a strong effect on the estimation of the geographical pattern of reservation wages in many countries. The size of this bias is substantial in Italy. When controlling for it, reservation wages are 10 per cent higher in the North and Centre than in the South.
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Bibliographic InfoPaper provided by Bank of Italy, Economic Research and International Relations Area in its series Temi di discussione (Economic working papers) with number 696.
Date of creation: Dec 2008
Date of revision:
reservation wages; sample selection; regional differentials;
Other versions of this item:
- Paolo Sestito & Eliana Viviano, 2011. "Reservation Wages: Explaining Some Puzzling Regional Patterns," LABOUR, CEIS, vol. 25(1), pages 63-88, 03.
- 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
- R23 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Regional Migration; Regional Labor Markets; Population
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-01-17 (All new papers)
- NEP-EEC-2009-01-17 (European Economics)
- NEP-GEO-2009-01-17 (Economic Geography)
- NEP-LAB-2009-01-17 (Labour Economics)
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