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The Reservation Wage of Unemployed Persons in the Federal Republic of Germany: Theory and Empirical Tests

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Author Info
Wolfgang Franz
Abstract

This study examines the determinants of the reservation wage of unemployed persons in the Federal Republic of Germany in 1976. The theoretical section presents the derivation of an optimal reservation wage and shows the source of an ambiguity of some explanatory variables. The data basis are unemployed persons leaving the unemployment register within a given sample week. For a subset of them, we know their reservation wage and a set of personal characteristics. Other variables, such as the wage offer distribution and demand side variables, are obtained by employing other data. Methodological problems, such as as a sample selection bias, are taken into account. As a result, individual characteristics and the wage offer distribution are dominant causes of the reservation wage, but demand side variables and the entitlement to unemployment compensation play minor roles.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 0578.

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Date of creation: Nov 1980
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Handle: RePEc:nbr:nberwo:0578

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Rothschild, Michael, 1974. "Searching for the Lowest Price When the Distribution of Prices Is Unknown," Journal of Political Economy, University of Chicago Press, vol. 82(4), pages 689-711, July/Aug.. [Downloadable!] (restricted)
  2. Hall, Robert E, 1978. "Stochastic Implications of the Life Cycle-Permanent Income Hypothesis: Theory and Evidence," Journal of Political Economy, University of Chicago Press, vol. 86(6), pages 971-87, December. [Downloadable!] (restricted)
  3. Steven H. Sandell, 1980. "Job search by unemployed women: Determinants of the asking wage," Industrial and Labor Relations Review, ILR Review, ILR School, Cornell University, vol. 33(3), pages 368-378, April.
  4. Burdett, Kenneth, 1979. "Unemployment Insurance Payments as a Search Subsidy: A Theoretical Analysis," Economic Inquiry, Oxford University Press, vol. 17(3), pages 333-43, July.
  5. Wolfgang Franz, 1979. "The Duration of Youth Unemployment in West Germany: Some Theoretical Considerations," NBER Working Papers 0397, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  6. Mellow, Wesley, 1978. "Search Costs and the Duration of Unemployment," Economic Inquiry, Oxford University Press, vol. 16(3), pages 423-30, July.
  7. Danforth, John P., 1977. "Wealth and the value of generalized lotteries," Journal of Economic Theory, Elsevier, vol. 15(1), pages 54-71, June. [Downloadable!] (restricted)
  8. Salant, Stephen W, 1977. "Search Theory and Duration Data: A Theory of Sorts," The Quarterly Journal of Economics, MIT Press, vol. 91(1), pages 39-57, February. [Downloadable!] (restricted)
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  9. Feinberg, Robert M, 1977. "Risk Aversion, Risk, and the Duration of Unemployment," The Review of Economics and Statistics, MIT Press, vol. 59(3), pages 264-71, August. [Downloadable!] (restricted)
  10. Heckman, James J, 1979. "Sample Selection Bias as a Specification Error," Econometrica, Econometric Society, vol. 47(1), pages 153-61, January. [Downloadable!] (restricted)
  11. Ken Burdett & Dale T. Mortensen, 1979. "Search, Layoffs, and Labor Market Equilibrium," Discussion Papers 380, Northwestern University, Center for Mathematical Studies in Economics and Management Science. [Downloadable!]
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  12. Spence, Michael & Zeckhauser, Richard J, 1972. "The Effect of the Timing of Consumption Decisions and the Resolution of Lotteries on the Choice of Lotteries," Econometrica, Econometric Society, vol. 40(2), pages 401-03, March. [Downloadable!] (restricted)
  13. Gronau, Reuben, 1971. "Information and Frictional Unemployment," American Economic Review, American Economic Association, vol. 61(3), pages 290-301, June. [Downloadable!] (restricted)
  14. Kohn, Meir G. & Shavell, Steven, 1974. "The theory of search," Journal of Economic Theory, Elsevier, vol. 9(2), pages 93-123, October. [Downloadable!] (restricted)
  15. John M. Barron & Otis W. Gilley, 1979. "The effect of unemployment insurance on the search process," Industrial and Labor Relations Review, ILR Review, ILR School, Cornell University, vol. 32(3), pages 363-366, April.
  16. Nickell, Stephen J, 1979. "Estimating the Probability of Leaving Unemployment," Econometrica, Econometric Society, vol. 47(5), pages 1249-66, September. [Downloadable!] (restricted)
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  1. Maani Sholeh, 1983. "La Duración del Desempleo y el Salario de Reserva de Varones Desempleados: El Caso Chileno," Cuadernos de Economía (Latin American Journal of Economics), Instituto de Economía. Pontificia Universidad Católica de Chile., vol. 20(59), pages 101-112. [Downloadable!]
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