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The Reservation Wage Theory, Vocational Rehabilitation and the Return to Work of Disabled Employees

Author

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  • Jan Høgelund

    (Danish National Institute of Social Research)

  • Anders Holm

    (Department of Sociology, University of Copenhagen)

Abstract

Previous studies find that participation in educational measures does not increase sick-listed em-ployees’ chance of returning to work. This is surprising because education is supposed to increase human capital and raise productivity. However, a higher productivity may make the participants raise their reservation wage. Therefore, it is possible that educational measures increase the chance of returning to work in high pay jobs but reduce the chance of returning to work in low pay jobs. To test this hypothesis, we use panel data of 671 long-term sick-listed employees to estimate a random effects hazards rate model, with returning to work in high paid jobs and low-medium paid jobs, re-spectively, as the two outcomes. Our findings do not support the reservation wage hypothesis. We find that while participation in education significantly increases the probability of returning to work in medium or low paid jobs, it does not affect the probability of resuming work in high paid jobs.

Suggested Citation

  • Jan Høgelund & Anders Holm, "undated". "The Reservation Wage Theory, Vocational Rehabilitation and the Return to Work of Disabled Employees," CAM Working Papers 2006-07, University of Copenhagen. Department of Economics. Centre for Applied Microeconometrics.
    • Handle: RePEc:kud:kuieca:2006_07
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    File URL: http://www.econ.ku.dk/cam/wp0910/wp0406/2006-07.pdf/
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    References listed on IDEAS

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    1. Heckman, James & Singer, Burton, 1984. "A Method for Minimizing the Impact of Distributional Assumptions in Econometric Models for Duration Data," Econometrica, Econometric Society, vol. 52(2), pages 271-320, March.
    2. Markus Frölich & Almas Heshmati & Michael Lechner, 2004. "A microeconometric evaluation of rehabilitation of long-term sickness in Sweden," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 19(3), pages 375-396.
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    Cited by:

    1. Bach, Henning & Datta Gupta, Nabanita & Høgelund, Jan, 2007. "Employment Effects of Educational Measures for Work-Injured People," IZA Discussion Papers 2657, Institute of Labor Economics (IZA).

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