Expectations, Reservation Wages And Employment: Evidence From British Panel Data
AbstractIn this paper, we explore the relationship between expectations and reservation wages for a sample of unemployed individuals using panel data drawn from the British Household Panel Survey, 1996 to 2005. To be specific, we initially investigate the determinants of expectations relating to the individual´s financial situation and employment prospects over the next 12 months. Our findings suggest that job search and education are positively associated with financial optimism and confidence regarding future employment prospects. Conversely, the length of time out of employment and age are associated with pessimistic expectations. Propensity score matching techniques enable us to adopt a quasi experimental approach to ascertain how an individual´s expectations regarding their future financial situation as well as expectations regarding securing future employment influence the setting of reservation wages at the individual level. Optimism over future finances and future job prospects are associated with a higher reservation wage in both the matched and unmatched estimates. Furthermore, confidence over securing future employment is associated with a higher probability of actually gaining employment in the next period.
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 The University of Sheffield, Department of Economics in its series Working Papers with number 2008007.
Length: 24 pages
Date of creation: May 2008
Date of revision: May 2008
Employment; Financial Expectations; Reservation Wages;
Find related papers by JEL classification:
- J13 - Labor and Demographic Economics - - Demographic Economics - - - Fertility; Family Planning; Child Care; Children; Youth
- J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
This paper has been announced in the following NEP Reports:
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.:
- Lancaster, Tony & Chesher, Andrew, 1983. "An Econometric Analysis of Reservation Wages," Econometrica, Econometric Society, vol. 51(6), pages 1661-76, November.
- Sarah Brown & Gaia Garino & Karl Taylor & Stephen Wheatley Price, 2005.
"Debt and Financial Expectations: An Individual- and Household-Level Analysis,"
Western Economic Association International, vol. 43(1), pages 100-120, January.
- Sarah Brown & Karl Taylor & Gaia Garino & Stephen Wheatley Price, 2003. "Debt and financial expectations: an individual and household level analysis," Discussion Papers in Economics 03/5, Department of Economics, University of Leicester, revised Feb 2004.
- Blackaby, D.H. & Latreille, P.L. & Murphy, P.D. & O'Leary, N.C. & Sloane, P.J., 2007.
"An analysis of reservation wages for the economically inactive,"
Elsevier, vol. 97(1), pages 1-5, October.
- Blackaby, David H. & Latreille, Paul L. & Murphy, Philip D. & O'Leary, Nigel C. & Sloane, Peter J., 2006. "An Analysis of Reservation Wages for the Economically Inactive," IZA Discussion Papers 1980, Institute for the Study of Labor (IZA).
- V. Joseph Hotz & Guido W. Imbens & Julie H. Mortimer, 1999. "Predicting the Efficacy of Future Training Programs Using Past Experiences," NBER Technical Working Papers 0238, National Bureau of Economic Research, Inc.
- Becker, Sascha O. & Caliendo, Marco, 2007.
"mhbounds – Sensitivity Analysis for Average Treatment Effects,"
IZA Discussion Papers
2542, Institute for the Study of Labor (IZA).
- Sascha O. Becker & Marco Caliendo, 2007. "Sensitivity analysis for average treatment effects," Stata Journal, StataCorp LP, vol. 7(1), pages 71-83, February.
- Sascha O. Becker & Marco Caliendo, 2007. "mhbounds - Sensitivity Analysis for Average Treatment Effects," Discussion Papers of DIW Berlin 659, DIW Berlin, German Institute for Economic Research.
- Heckman, James J & Ichimura, Hidehiko & Todd, Petra E, 1997. "Matching as an Econometric Evaluation Estimator: Evidence from Evaluating a Job Training Programme," Review of Economic Studies, Wiley Blackwell, vol. 64(4), pages 605-54, October.
- Barbara Sianesi, 2001. "Propensity score matching," United Kingdom Stata Users' Group Meetings 2001 12, Stata Users Group, revised 23 Aug 2001.
- Sarah Brown & Karl Taylor & Robert McNabb, 2006.
"Financial Expectations, Consumption and Saving: A Microeconomic Analysis,"
2006006, The University of Sheffield, Department of Economics, revised May 2006.
- Sarah Brown & Karl Taylor, 2006. "Financial expectations, consumption and saving: a microeconomic analysis," Fiscal Studies, Institute for Fiscal Studies, vol. 27(3), pages 313-338, August.
- Charles F. Manski, 2004. "Measuring Expectations," Econometrica, Econometric Society, vol. 72(5), pages 1329-1376, 09.
- John T. Addison & Mário Centeno & Pedro Portugal, 2008.
"Unemployment Benefits and Reservation Wages: Key Elasticities from a Stripped-Down Job Search Approach,"
w200803, Banco de Portugal, Economics and Research Department.
- John T. Addison & M�Rio Centeno & Pedro Portugal, 2010. "Unemployment Benefits and Reservation Wages: Key Elasticities from a Stripped-Down Job Search Approach," Economica, London School of Economics and Political Science, vol. 77(305), pages 46-59, 01.
- Addison, John T. & Centeno, Mario & Portugal, Pedro, 2008. "Unemployment Benefits and Reservation Wages: Key Elasticities from a Stripped-Down Job Search Approach," IZA Discussion Papers 3357, Institute for the Study of Labor (IZA).
- Sascha O. Becker & Andrea Ichino, 2002. "Estimation of average treatment effects based on propensity scores," Stata Journal, StataCorp LP, vol. 2(4), pages 358-377, November.
- Edwin Leuven & Barbara Sianesi, 2003. "PSMATCH2: Stata module to perform full Mahalanobis and propensity score matching, common support graphing, and covariate imbalance testing," Statistical Software Components S432001, Boston College Department of Economics, revised 12 Feb 2014.
- J. Dominitz & C. F. Manski, .
"Using expectations data to study subjective income expectations,"
Institute for Research on Poverty Discussion Papers
1050-94, University of Wisconsin Institute for Research on Poverty.
- Jeff Dominitz & Charles F. Manski, 1994. "Using Expectations Data to Study Subjective Income Expectations," NBER Working Papers 4937, National Bureau of Economic Research, Inc.
- Jeff Dominitz & Charles F. Manski, 1994. "Using Expectations Data to Study Subjective Income Expectations," Econometrics 9411003, EconWPA.
- Mitchell, James & Weale, Martin R., 2007. "The rationality and reliability of expectations reported by British households: micro evidence from the British household panel survey," Discussion Paper Series 1: Economic Studies 2007,19, Deutsche Bundesbank, Research Centre.
- Sarah Brown & Gaia Garino & Karl Taylor, 2005.
"Mortgages and Financial Expectations: A Household Level Analysis,"
Discussion Papers in Economics
05/9, Department of Economics, University of Leicester, revised Dec 2006.
- Sarah Brown & Gaia Garino & Karl Taylor, 2008. "Mortgages and Financial Expectations: A Household-Level Analysis," Southern Economic Journal, Southern Economic Association, vol. 74(3), pages 857-878, January.
- Jyotsna Jalan & Martin Ravallion, 2000.
"Estimating the Benefit Incidence of an Antipoverty Program by Propensity Score Matching,"
Econometric Society World Congress 2000 Contributed Papers
0873, Econometric Society.
- Jalan, Jyotsna & Ravallion, Martin, 2003. "Estimating the Benefit Incidence of an Antipoverty Program by Propensity-Score Matching," Journal of Business & Economic Statistics, American Statistical Association, vol. 21(1), pages 19-30, January.
- Sarah Brown & Stephen Pudney, 2005. "Hours Constraints and In-Work Poverty," Bulletin of Economic Research, Wiley Blackwell, vol. 57(3), pages 305-315, 07.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Georgios Efthyvoulou).
If references are entirely missing, you can add them using this form.