IDEAS home Printed from https://ideas.repec.org/a/sae/inrsre/v30y2007i2p120-151.html

Wage Inequality, Reservation Wages and Labor Market Participation

Author

Listed:
  • Joachim Möller

    (Institute of Economics, University of Regensburg, Regensburg, Germany, joachim.moeller@wiwi.uni-regensburg.de)

  • Alisher Aldashev

    (Center for European Economic Research (ZEW), Mannheim, Germany, aldashev@zew.de)

Abstract

This article presents an analysis of the variation of gender-specific labor-market participation rates across regions. A search-theoretical model with intertemporal optimization behavior of agents suggests that a higher regional wage level fosters participation, whereas higher unemployment discourages workers. The authors extend the standard model by introducing two measures of dispersion, one for the spread below and one for the spread above the median. It is shown that wage dispersion in the lower tail of the distribution decreases the value of search and leads to lower participation rates, although the reverse is true for wage dispersion in the upper tail. These implications of the model are tested using spatial econometrics.

Suggested Citation

  • Joachim Möller & Alisher Aldashev, 2007. "Wage Inequality, Reservation Wages and Labor Market Participation," International Regional Science Review, , vol. 30(2), pages 120-151, April.
    • Handle: RePEc:sae:inrsre:v:30:y:2007:i:2:p:120-151
    DOI: 10.1177/0160017606298431
    as

    Download full text from publisher

    File URL: https://journals.sagepub.com/doi/10.1177/0160017606298431
    Download Restriction: no
    File URL: https://libkey.io/10.1177/0160017606298431?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Albrecht, James W & Axell, Bo, 1984. "An Equilibrium Model of Search Unemployment," Journal of Political Economy, University of Chicago Press, vol. 92(5), pages 824-840, October.
    2. repec:fth:iniesr:466 is not listed on IDEAS
    3. Assar Lindbeck, 1996. "The West European employment problem," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 132(4), pages 609-637, December.
    4. Davidson, Russell & MacKinnon, James G., 1993. "Estimation and Inference in Econometrics," OUP Catalogue, Oxford University Press, number 9780195060119.
    5. Burda, Michael C. & Profit, Stefan, 1996. "Matching across space: Evidence on mobility in the Czech Republic," Labour Economics, Elsevier, vol. 3(3), pages 255-278, October.
    6. J. J. McCall, 1970. "Economics of Information and Job Search," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 84(1), pages 113-126.
    7. George J. Stigler, 1962. "Information in the Labor Market," NBER Chapters, in: Investment in Human Beings, pages 94-105, National Bureau of Economic Research, Inc.
    8. Kim B. Clark & Lawrence H. Summers, 1982. "Labour Force Participation: Timing and Persistence," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 49(5), pages 825-844.
    9. Badi Baltagi & Dong Li, 2001. "Double Length Artificial Regressions For Testing Spatial Dependence," Econometric Reviews, Taylor & Francis Journals, vol. 20(1), pages 31-40.
    10. Roger Bivand & Albrecht Gebhardt, 2000. "Implementing functions for spatial statistical analysis using the language," Journal of Geographical Systems, Springer, vol. 2(3), pages 307-317, September.
    11. Anselin, Luc & Bera, Anil K. & Florax, Raymond & Yoon, Mann J., 1996. "Simple diagnostic tests for spatial dependence," Regional Science and Urban Economics, Elsevier, vol. 26(1), pages 77-104, February.
    12. Joachim Möller & Alisher Aldashev, 2006. "Interregional differences in labor market participation," Review of Regional Research: Jahrbuch für Regionalwissenschaft, Springer;Gesellschaft für Regionalforschung (GfR), vol. 26(1), pages 25-50, March.
    13. van den Berg, Gerard J, 1999. "Empirical Inference with Equilibrium Search Models of the Labour Market," Economic Journal, Royal Economic Society, vol. 109(456), pages 283-306, June.
    14. Gerard J. van den Berg & Geert Ridder, 1998. "An Empirical Equilibrium Search Model of the Labor Market," Econometrica, Econometric Society, vol. 66(5), pages 1183-1222, September.
    15. Blau, Francine D & Kahn, Lawrence M, 1996. "International Differences in Male Wage Inequality: Institutions versus Market Forces," Journal of Political Economy, University of Chicago Press, vol. 104(4), pages 791-836, August.
    16. Dale T. Mortensen, 1977. "Unemployment Insurance and Labor Supply Decisions," Discussion Papers 271, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
    17. Dale T. Mortensen & Christopher A. Pissarides, 1994. "Job Creation and Job Destruction in the Theory of Unemployment," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 61(3), pages 397-415.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Shoichi Sasaki, 2017. "Empirical analysis of the effects of increasing wage inequalities on marriage behaviors in Japan," Discussion Papers 1705, Graduate School of Economics, Kobe University.
    2. Dolton, Peter & Bondibene, Chiara Rosazza & Stops, Michael, 2015. "Identifying the employment effect of invoking and changing the minimum wage: A spatial analysis of the UK," Labour Economics, Elsevier, vol. 37(C), pages 54-76.
    3. Sasaki, Shoichi, 2017. "Empirical analysis of the effects of increasing wage inequalities on marriage behaviors in Japan," Journal of the Japanese and International Economies, Elsevier, vol. 46(C), pages 27-42.
    4. Lottmann, Franziska, 2012. "Spatial dependencies in German matching functions," Regional Science and Urban Economics, Elsevier, vol. 42(1-2), pages 27-41.
    5. Shoichi Sasaki, 2014. "An empirical analysis of the effect of increasing male wage inequality on female marriage behavior in Japan," Discussion Papers 1401, Graduate School of Economics, Kobe University.
    6. Möller Joachim & Tubadji Annie, 2009. "The Creative Class, Bohemians and Local Labor Market Performance: A Micro-data Panel Study for Germany 1975–2004," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 229(2-3), pages 270-291, April.
    7. Lehmer, Florian & Ludsteck, Johannes, 2008. "The returns to job mobility and inter-regional migration," IAB-Discussion Paper 200806, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
    8. Bogdan-Constantin Ibanescu & Alexandra Gheorghiu & Mioara Cristea & Gabriela Carmen Pascariu, 2023. "The Evolution of Job Insecurity in Spatial Contexts in Europe During COVID-19 Pandemic," International Regional Science Review, , vol. 46(5-6), pages 552-576, September.
    9. repec:hum:wpaper:sfb649dp2010-054 is not listed on IDEAS
    10. Giuseppe Arbia, 2011. "A Lustrum of SEA: Recent Research Trends Following the Creation of the Spatial Econometrics Association (2007--2011)," Spatial Economic Analysis, Taylor & Francis Journals, vol. 6(4), pages 377-395, July.
    11. Michael Stops & Peter Dolton & Chiara Rosazza-Bondibene, 2012. "The Spatial Analysis of the Employment Effect of the Minimum Wage: Case of the UK 1999-2010," ERSA conference papers ersa12p225, European Regional Science Association.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Joachim Möller & Alisher Aldashev, 2006. "Interregional differences in labor market participation," Review of Regional Research: Jahrbuch für Regionalwissenschaft, Springer;Gesellschaft für Regionalforschung (GfR), vol. 26(1), pages 25-50, March.
    2. Joachim Möller, 2009. "Regional variations in the price of building land: a spatial econometrics approach for West Germany," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 43(1), pages 113-132, March.
    3. Andreas Hornstein & Per Krusell & Giovanni L. Violante, 2011. "Frictional Wage Dispersion in Search Models: A Quantitative Assessment," American Economic Review, American Economic Association, vol. 101(7), pages 2873-2898, December.
    4. Violante, Giovanni & Hornstein, Andreas, 2006. "Frictional Wage Dispersion in Search Models: A Quantitative Approach," CEPR Discussion Papers 5935, C.E.P.R. Discussion Papers.
    5. Shaimaa Yassin, 2013. "Structural Labor Market Transitions and Wage Dispersion in Egypt and Jordan," Working Papers 753, Economic Research Forum, revised May 2013.
    6. van den Berg, Gerard J. & van Vuuren, Aico, 2010. "The effect of search frictions on wages," Labour Economics, Elsevier, vol. 17(6), pages 875-885, December.
    7. J. Ignacio Garcia-Perez, 2002. "Equilibrium search models: the role of the assumptions," Investigaciones Economicas, Fundación SEPI, vol. 26(2), pages 255-284, May.
    8. Bemjamin Villena-Roldan, 2009. "Aggregate Implications of Employer Search and Recruiting Selection," 2009 Meeting Papers 97, Society for Economic Dynamics.
    9. Carlos Alberto Foronda Rojas & Andrea Alcaráz, "undated". "Estimación y características de la duración del desempleo en Bolivia," Investigación & Desarrollo 0215, Universidad Privada Boliviana.
    10. Hugo Benitez-Silva, 2001. "A Dynamic Model of Job Search Behavior over the Life Cycle with Empirical Applications," Computing in Economics and Finance 2001 100, Society for Computational Economics.
    11. Harald Mayr, 2022. "Cheap search, picky workers? Evidence from a field experiment," Economics Bulletin, AccessEcon, vol. 42(4), pages 2079-2087.
    12. Jordi Brandts & Arthur Schram & Klarita Gërxhani, 2007. "Information Networks and Worker Recruitment," UFAE and IAE Working Papers 707.07, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
    13. Gerard J. van den Berg, 2003. "Multiple Equilibria and Minimum Wages in Labor Markets with Informational Frictions and Heterogeneous Production Technologies," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 44(4), pages 1337-1357, November.
    14. Jos van Ommeren & Giovanni Russo, 2004. "Sequential or Non-sequential Recruitment?," Tinbergen Institute Discussion Papers 04-109/3, Tinbergen Institute, revised 15 Sep 2008.
    15. Fabien Postel-Vinay & Jean-Marc Robin, 2002. "Equilibrium Wage Dispersion with Worker and Employer Heterogeneity," SciencePo Working papers hal-03458567, HAL.
    16. Menzio, Guido & Telyukova, Irina A. & Visschers, Ludo, 2015. "Directed Search over the Life Cycle," 2007 Annual Meeting, July 29-August 1, 2007, Portland, Oregon TN 2015-48, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    17. Lourens Broersma & Frank A. G. den Butter & Udo Kock, 2006. "A cointegration model for search equilibrium wage formation," Journal of Applied Economics, Universidad del CEMA, vol. 9, pages 235-254, November.
    18. Ronald P. Wolthoff, 2010. "Applications and Interviews: A Structural Analysis of Two-Sided Simultaneous Search," Working Papers tecipa-418, University of Toronto, Department of Economics.
    19. Guido Menzio & Irina Telyukova & Ludo Visschers, 2016. "Directed Search over the Life Cycle," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 19, pages 38-62, January.
    20. Badi Baltagi & Long Liu, 2014. "Testing for spatial lag and spatial error dependence using double length artificial regressions," Statistical Papers, Springer, vol. 55(2), pages 477-486, May.

    More about this item

    Keywords

    ;
    ;
    ;
    ;
    ;
    ;

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:sae:inrsre:v:30:y:2007:i:2:p:120-151. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: SAGE Publications (email available below). General contact details of provider: .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.