The Reservation Wage Unemployment Duration Nexus
AbstractA thorny problem in identifying the determinants of reservation wages and particularly the role of continued joblessness in their evolution is the simultaneity issue. We deploy a natural control function approach to the problem that involves conditioning elapsed duration on completed unemployment duration in the reservation wage equation. Our analysis confirms that the use of elapsed duration alone compounds two separate and opposing influences. Only with the inclusion of completed duration is the negative effect of continued joblessness on reservation wages apparent. For its part, the completed duration coefficient suggests that higher reservation wages negatively influence the probability of exiting unemployment.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Banco de Portugal, Economics and Research Department in its series Working Papers with number w201026.
Date of creation: 2010
Date of revision:
Other versions of this item:
- J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
- J65 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment Insurance; Severance Pay; Plant Closings
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-12-18 (All new papers)
- NEP-LAB-2010-12-18 (Labour Economics)
- NEP-LTV-2010-12-18 (Unemployment, Inequality & Poverty)
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.:
- Abraham, Katharine G & Farber, Henry S, 1987.
"Job Duration, Seniority, and Earnings,"
American Economic Review,
American Economic Association, vol. 77(3), pages 278-97, June.
- Katharine G. Abraham & Henry S. Farber, 1986. "Job Duration, Seniority and Earnings," Working papers 407, Massachusetts Institute of Technology (MIT), Department of Economics.
- Katharine G. Abraham & Henry S. Farber, 1987. "Job Duration, Seniority, and Earnings," NBER Working Papers 1819, National Bureau of Economic Research, Inc.
- Addison, John T. & Centeno, Mario & Portugal, Pedro, 2004.
"Reservation Wages, Search Duration, and Accepted Wages in Europe,"
IZA Discussion Papers
1252, Institute for the Study of Labor (IZA).
- John T. Addison & Mário Centeno & Pedro Portugal, 2004. "Reservation Wages, Search Duration, and Accepted Wages in Europe," Working Papers w200413, Banco de Portugal, Economics and Research Department.
- Paolo Sestito & Eliana Viviano, 2008.
"Reservation wages: explaining some puzzling regional patterns,"
Temi di discussione (Economic working papers)
696, Bank of Italy, Economic Research and International Relations Area.
- Paolo Sestito & Eliana Viviano, 2011. "Reservation Wages: Explaining Some Puzzling Regional Patterns," LABOUR, CEIS, vol. 25(1), pages 63-88, 03.
- Lancaster, Tony & Chesher, Andrew, 1983. "An Econometric Analysis of Reservation Wages," Econometrica, Econometric Society, vol. 51(6), pages 1661-76, November.
- 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.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (DEE-NTDD).
If references are entirely missing, you can add them using this form.