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Individual Wealth, Reservation Wages, and Transitions into Employment

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  • Hans Bloemen

    (CentER (CentER))

  • Elena Stancanelli

    (Théorie économique, modélisation et applications (THEMA))

Abstract

We investigate the relationship between financial wealth, reservation wages, and labor market transitions. Wealth is assumed to affect the level of the reservation wage and the employment probability. We test for the validity of this assumption by estimating a simultaneous‐equations model of reservation wages, labor market transitions, and wealth. The data used for the analysis relate to a sample of unemployed job searchers. We use subjective information on the reservation wage. Wealth is found to have a significantly positive impact on the reservation wage. The overall impact of wealth on the employment probability is negative though small.

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Paper provided by Sciences Po in its series Sciences Po publications with number info:hdl:2441/9704.

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Date of creation: Apr 2001
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Publication status: Published in Journal of Labor Economics, 2001, vol. 19, pp.400-439
Handle: RePEc:spo:wpmain:info:hdl:2441/9704

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  1. van den Berg, Gerard J, 1990. "Nonstationarity in Job Search Theory," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 57(2), pages 255-77, April.
  2. Douglas Staiger & James H. Stock, 1997. "Instrumental Variables Regression with Weak Instruments," Econometrica, Econometric Society, Econometric Society, vol. 65(3), pages 557-586, May.
  3. Berg, G.J. van den & Gorter, C., 1996. "Job search and commuting time," Serie Research Memoranda, VU University Amsterdam, Faculty of Economics, Business Administration and Econometrics 0001, VU University Amsterdam, Faculty of Economics, Business Administration and Econometrics.
  4. Blundell, Richard & Magnac, Thierry & Meghir, Costas, 1997. "Savings and Labor-Market Transitions," Journal of Business & Economic Statistics, American Statistical Association, American Statistical Association, vol. 15(2), pages 153-64, April.
  5. Bloemen, H.G., 1995. "The relation between wealth and labour market transitions: An empirical study for the Netherlands," Discussion Paper, Tilburg University, Center for Economic Research 1995-99, Tilburg University, Center for Economic Research.
  6. Lippman, Steven A & McCall, John J, 1976. "The Economics of Job Search: A Survey," Economic Inquiry, Western Economic Association International, Western Economic Association International, vol. 14(3), pages 347-68, September.
  7. Olivier Jean Blanchard & Peter Diamond, 1990. "Ranking, Unemployment Duration, and Wages," NBER Working Papers 3387, National Bureau of Economic Research, Inc.
  8. Blau, David M & Robins, Philip K, 1990. "Job Search Outcomes for the Employed and Unemployed," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 98(3), pages 637-55, June.
  9. Stancanelli, E.G.F., 1997. "Do the rich stay unemployed longer? An empirical study for the U.K," Discussion Paper, Tilburg University, Center for Economic Research 97.81, Tilburg University, Center for Economic Research.
  10. Stancanelli, E.G.F., 1994. "The unemployed's financial resources and the probality of re-employment," Serie Research Memoranda, VU University Amsterdam, Faculty of Economics, Business Administration and Econometrics 0047, VU University Amsterdam, Faculty of Economics, Business Administration and Econometrics.
  11. Lancaster, Tony & Chesher, Andrew, 1983. "An Econometric Analysis of Reservation Wages," Econometrica, Econometric Society, Econometric Society, vol. 51(6), pages 1661-76, November.
  12. Silvio Rendón, 2002. "Job Search And Asset Accumulation Under Borrowing Constraints," Economics Working Papers we025219, Universidad Carlos III, Departamento de Economía.
  13. Bekker, Paul A, 1994. "Alternative Approximations to the Distributions of Instrumental Variable Estimators," Econometrica, Econometric Society, Econometric Society, vol. 62(3), pages 657-81, May.
  14. Atkinson, Anthony B & Micklewright, John, 1991. "Unemployment Compensation and Labor Market Transitions: A Critical Review," Journal of Economic Literature, American Economic Association, vol. 29(4), pages 1679-1727, December.
  15. Lippman, Steven A & McCall, John J, 1976. "The Economics of Job Search: A Survey: Part I," Economic Inquiry, Western Economic Association International, Western Economic Association International, vol. 14(2), pages 155-89, June.
  16. Denis Fougère & Jacqueline Pradel & Muriel Roger, 1998. "The Influence of the State Employment Service on the Search Effort and on the Probability of Leaving Unemployment," Working Papers, Centre de Recherche en Economie et Statistique 98-36, Centre de Recherche en Economie et Statistique.
  17. Devine, Theresa J. & Kiefer, Nicolas M., 1991. "Empirical Labor Economics: The Search Approach," OUP Catalogue, Oxford University Press, Oxford University Press, number 9780195059366, October.
  18. Stancanelli, E.G.F., 1997. "Do the wealthier stay unemployed longer? An empirical study for the UK," Discussion Paper, Tilburg University, Center for Economic Research 9781, Tilburg University, Center for Economic Research.
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