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An analysis of reservation wages for the economically inactive


  • Blackaby, D.H.
  • Latreille, P.L.
  • Murphy, P.D.
  • O'Leary, N.C.
  • Sloane, P.J.


This paper uses unique data for the economically inactive to calculate elasticity estimates of the reservation wage and exit probability with respect to state benefits and the arrival rate of job offers, and finds that the inactive react in similar ways to benefit increases as the unemployed.
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Suggested Citation

  • 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," Economics Letters, Elsevier, vol. 97(1), pages 1-5, October.
  • Handle: RePEc:eee:ecolet:v:97:y:2007:i:1:p:1-5

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    References listed on IDEAS

    1. Lancaster, Tony & Chesher, Andrew, 1983. "An Econometric Analysis of Reservation Wages," Econometrica, Econometric Society, vol. 51(6), pages 1661-1676, November.
    2. Mortensen, Dale T., 1987. "Job search and labor market analysis," Handbook of Labor Economics,in: O. Ashenfelter & R. Layard (ed.), Handbook of Labor Economics, edition 1, volume 2, chapter 15, pages 849-919 Elsevier.
    3. Narendranathan, Wiji & Nickell, Stephen, 1985. "Modelling the process of job search," Journal of Econometrics, Elsevier, vol. 28(1), pages 29-49, April.
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    Cited by:

    1. Vassil, Kristjan & Eamets, Raul & Mõtsmees, Pille, 2014. "Socio-demographic Model of Gender Gap in Expected and Actual Wages in Estonia," IZA Discussion Papers 8604, Institute for the Study of Labor (IZA).
    2. 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.
    3. Brown, Sarah & Taylor, Karl, 2015. "The reservation wage curve: Evidence from the UK," Economics Letters, Elsevier, vol. 126(C), pages 22-24.
    4. Lammers, Marloes, 2014. "The effects of savings on reservation wages and search effort," Labour Economics, Elsevier, vol. 27(C), pages 83-98.
    5. 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.
    6. 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.
    7. Brown, Sarah & Taylor, Karl, 2013. "Reservation wages, expected wages and unemployment," Economics Letters, Elsevier, vol. 119(3), pages 276-279.
    8. Mariusz Kaszubowski & Joanna Wolszczak-Derlacz, 2014. "Salary and reservation wage gender gaps in Polish academia," GUT FME Working Paper Series A 19, Faculty of Management and Economics, Gdansk University of Technology.
    9. 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.
    10. 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.
    11. Sarah Brown & Karl Taylor, 2008. "Reservation Wages, Expected Wages and Labour Market Outcomes: Analysis of Individual Level Panel Data," Working Papers 2008008, The University of Sheffield, Department of Economics, revised Jul 2008.
    12. Sarah Brown & Karl Taylor, "undated". "Reservation Wages, Expected wages and the duration of Unemployment: evidence from British Panel data," Working Papers 2009001, The University of Sheffield, Department of Economics.
    13. Sarah Brown & Karl Taylor, 2008. "Expectations, Reservation Wages And Employment: Evidence From British Panel Data," Working Papers 2008007, The University of Sheffield, Department of Economics, revised May 2008.
    14. Liina Malk, 2015. "Determinants of reservation wages: empirical evidence for Estonia," Bank of Estonia Working Papers wp2014-8, Bank of Estonia, revised 20 Jan 2015.
    15. DIOP-CHRISTENSEN Anna, 2012. "Beating the "unemployable" with a stick: The effect of economic incentives on unemployed immigrants and their social welfare workers," LISER Working Paper Series 2012-30, LISER.

    More about this item

    JEL classification:

    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials


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