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The Determinants of Reservation Wages in Germany Does a Motivation Gap Exist?

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  • Björn Christensen
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    Abstract

    This paper investigates the reservation wages of unemployed persons on the basis of a job-search model with non-static reservation wages using panel data from Germany from 1987 to 1998. The results suggest that reservation wages are relatively high in Germany compared to other countries. Furthermore, pooled regression results show that most recent wages and personal characteristics of the unemployed are the most important determinants of reservation wages. In contrast neither unemployment duration nor different kinds of unemployment benefits influence reservation wages. Hence the findings corroborate the hypothesis that unemployed persons are not subject to strong financial pressure and thus have no significant motivation to find a new job.

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    File URL: http://www.ifw-members.ifw-kiel.de/publications/the-determinants-of-reservation-wages-in-germany-does-a-motivation-gap-exist/kap1024.pdf
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    Bibliographic Info

    Paper provided by Kiel Institute for the World Economy in its series Kiel Working Papers with number 1024.

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    Length: 50 pages
    Date of creation: Jan 2001
    Date of revision:
    Handle: RePEc:kie:kieliw:1024

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    Related research

    Keywords: Pooled Regression; Unemployment; Labour Supply; Reservation Wages;

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    References

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    1. Kim B. Clark & Lawrence H. Summers, 1979. "Labor Market Dynamics and Unemployemnt: A Reconsideration," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 10(1), pages 13-72.
    2. Hausman, Jerry A, 1978. "Specification Tests in Econometrics," Econometrica, Econometric Society, vol. 46(6), pages 1251-71, November.
    3. Warner, John T & Poindexter, J Carl, Jr & Fearn, Robert M, 1980. "Employer-Employee Interaction and the Duration of Unemployment," The Quarterly Journal of Economics, MIT Press, vol. 94(2), pages 211-33, March.
    4. Burdett, Kenneth & Vishwanath, Tara, 1988. "Declining Reservation Wages and Learning," Review of Economic Studies, Wiley Blackwell, vol. 55(4), pages 655-65, October.
    5. Feldstein, Martin & Poterba, James, 1984. "Unemployment insurance and reservation wages," Journal of Public Economics, Elsevier, vol. 23(1-2), pages 141-167.
    6. White, Halbert, 1980. "A Heteroskedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity," Econometrica, Econometric Society, vol. 48(4), pages 817-38, May.
    7. Berg, G.J. van den, 1987. "Nonstationarity in job search theory," Research Memorandum 242, Tilburg University, Faculty of Economics and Business Administration.
    8. 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.
    9. 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.
    10. John M. Barron & Wesley Mellow, 1981. "Changes in Labor Force Status among the Unemployed," Journal of Human Resources, University of Wisconsin Press, vol. 16(3), pages 427-441.
    11. Vincent Hogan, 1999. "The Determinants of the Reservation Wage," Working Papers 199916, School Of Economics, University College Dublin.
    12. Klodt, Henning & Maurer, Rainer & Schimmelpfennig, Axel, 1997. "Tertiarisierung in der deutschen Wirtschaft," Open Access Publications from Kiel Institute for the World Economy 959, Kiel Institute for the World Economy (IfW).
    13. Lazear, Edward P, 1981. "Agency, Earnings Profiles, Productivity, and Hours Restrictions," American Economic Review, American Economic Association, vol. 71(4), pages 606-20, September.
    14. Jones, Stephen R G, 1988. "The Relationship between Unemployment Spells and Reservation Wages as a Test of Search Theory," The Quarterly Journal of Economics, MIT Press, vol. 103(4), pages 741-65, November.
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    Cited by:
    1. Horst Siebert, 2005. "Germany’s Stalling Economic Engine – How to Get it Running Again," De Economist, Springer, vol. 153(3), pages 243-255, 09.

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