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Reservation wages, labour market participation and health

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  • Sarah Brown
  • Jennifer Roberts
  • Karl Taylor

Abstract

The concept of the reservation wage has played an important role in labour market theory, particularly in models of job search, labour supply and labour market participation. We focus on the determinants of reservation wages, with a particular focus on health, which has attracted very little attention despite its importance from a policy perspective. Using UK data we estimate an endogenous switching model which predicts reservation wages for the unemployed and market wages for the employed. Our results have important policy implications since they suggest that poor health is a major cause of economic inactivity. Copyright (c) 2010 Royal Statistical Society.

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  • Sarah Brown & Jennifer Roberts & Karl Taylor, 2010. "Reservation wages, labour market participation and health," Journal of the Royal Statistical Society Series A, Royal Statistical Society, vol. 173(3), pages 501-529.
  • Handle: RePEc:bla:jorssa:v:173:y:2010:i:3:p:501-529
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    References listed on IDEAS

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    Cited by:

    1. Caliendo, Marco & Lee, Wang-Sheng & Mahlstedt, Robert, 2017. "The gender wage gap and the role of reservation wages: New evidence for unemployed workers," Journal of Economic Behavior & Organization, Elsevier, vol. 136(C), pages 161-173.
    2. Kuhn, Michael & Prettner, Klaus, 2016. "Growth and welfare effects of health care in knowledge-based economies," Journal of Health Economics, Elsevier, vol. 46(C), pages 100-119.
    3. Alan S Duncan & Mark N Harris & Anthony Harris & Eugenio Zucchelli, 2013. "The Influence of Psychological Well-being, Ill Health and Health Shocks on Single Parents' Labour Supply," Bankwest Curtin Economics Centre Working Paper series WP1307, Bankwest Curtin Economics Centre (BCEC), Curtin Business School.
    4. Maik T. Schneider & Ralph Winkler, 2010. "Growth and Welfare under Endogenous Lifetime," Diskussionsschriften dp1013, Universitaet Bern, Departement Volkswirtschaft.
    5. Yolanda Pena-Boquete & Manuel Flores, 2013. "Earnings returns to education, experience and health: Evidence from EU-SILC," ERSA conference papers ersa13p1169, European Regional Science Association.
    6. repec:oup:oxecpp:v:69:y:2017:i:3:p:734-757. is not listed on IDEAS
    7. Théophile Azomahou & Bity Diene & Mbaye Diene & Luc Soete, 2015. "Optimal health investment and preference structure," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 60(3), pages 521-565, November.
    8. Manuel Flores & Adriaan Kalwij, 2013. "What do wages add to the health-employment nexus? Evidence from older European workers," Documentos de trabajo - Analise Economica 0054, IDEGA - Instituto Universitario de Estudios e Desenvolvemento de Galicia.
    9. Brown, Sarah & Taylor, Karl, 2014. "Household finances and the ‘Big Five’ personality traits," Journal of Economic Psychology, Elsevier, vol. 45(C), pages 197-212.
    10. Caliendo, Marco & Mahlstedt, Robert & Mitnik, Oscar A., 2017. "Unobservable, but unimportant? The relevance of usually unobserved variables for the evaluation of labor market policies," Labour Economics, Elsevier, vol. 46(C), pages 14-25.
    11. Jennifer Roberts & Karl Taylor, 2017. "Intra-household commuting choices and local labour markets," Oxford Economic Papers, Oxford University Press, vol. 69(3), pages 734-757.
    12. Stephan Humpert & Christian Pfeifer, 2011. "Explaining Age and Gender Differences in Employment Rates: A Labor Supply Side Perspective," Working Paper Series in Economics 214, University of Lüneburg, Institute of Economics.
    13. Castro, Alyssa Mae & Deluna, Roperto Jr, 2013. "Factors Affecting Call Center as a Job Preference among Employees in Davao City," MPRA Paper 51678, University Library of Munich, Germany.
    14. Brown, Sarah & Roberts, Jennifer & Taylor, Karl, 2011. "The gender reservation wage gap: Evidence from British Panel data," Economics Letters, Elsevier, vol. 113(1), pages 88-91, October.
    15. Mark Stater & Jeffrey B Wenger, 2017. "The Immediate Hardship of Unemployment: Evidence from the US Unemployment Insurance System," Eastern Economic Journal, Palgrave Macmillan;Eastern Economic Association, vol. 43(1), pages 17-36, January.
    16. Nordlund, Madelende & Strandh, Mattias, 2014. "The relation between economic and non-economic incentives to work and employment chances among the unemployed," Working Paper Series 2014:23, IFAU - Institute for Evaluation of Labour Market and Education Policy.
    17. Owen O'Donnell & Eddy Van Doorslaer & Tom Van Ourti, 2013. "Health and Inequality," Tinbergen Institute Discussion Papers 13-170/V, Tinbergen Institute.
    18. Zucchelli, E. & Harris, M. & Zhao, X., 2012. "Ill-health and transitions to part-time work and self-employment among older workers," Health, Econometrics and Data Group (HEDG) Working Papers 12/04, HEDG, c/o Department of Economics, University of York.
    19. Brown, Sarah & Taylor, Karl, 2011. "Reservation wages, market wages and unemployment: Analysis of individual level panel data," Economic Modelling, Elsevier, vol. 28(3), pages 1317-1327, May.
    20. Caliendo, Marco & Mahlstedt, Robert & Mitnik, Oscar, 2014. "Unobservable, but Unimportant? The Influence of Personality Traits (and Other Usually Unobserved Variables) for the Estimation of Treatment Effects," Annual Conference 2014 (Hamburg): Evidence-based Economic Policy 100502, Verein für Socialpolitik / German Economic Association.
    21. Harris, M.N. & Zhao, X. & Zucchelli, E., 2016. "The dynamics of health and labour market transitions at older ages: evidence from a multi-state model," Health, Econometrics and Data Group (HEDG) Working Papers 16/30, HEDG, c/o Department of Economics, University of York.

    More about this item

    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

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