The estimation of reservation wages: A simulation-based comparison
AbstractThis paper examines the predictive power of different estimation approaches for reservation wages. It applies stochastic frontier models for employed workers and the approach from Kiefer and Neumann (1979b) for unemployed workers. Furthermore, the question of whether or not reservation wages decrease over the unemployment period is addressed. This is done by a pseudo-panel with known reservation wages which uses data from the German Socio-Economic Panel as a basis. The comparison of the estimators is carried out by a Monte Carlo simulation. The best results are achieved by the cross-sectional stochastic frontier model. The Kiefer-Neumann approach failed to predict the decreasing reservation wages correctly. --
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Bibliographic InfoPaper provided by Hamburg Institute of International Economics (HWWI) in its series HWWI Research Papers with number 124.
Date of creation: 2012
Date of revision:
job search theory; Monte Carlo simulation; reservation wages; stochastic wage frontiers;
Find related papers by JEL classification:
- C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
- C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Longitudinal Data; Spatial Time Series
- J64 - Labor and Demographic Economics - - Mobility, Unemployment, and Vacancies - - - Unemployment: Models, Duration, Incidence, and Job Search
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-05-22 (All new papers)
- NEP-ECM-2012-05-22 (Econometrics)
- NEP-LAB-2012-05-22 (Labour Economics)
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