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Inferring the Adequacy of Wage Expectations Among the Non-Working

Listed author(s):
  • Paweł Strzelecki
  • Joanna Tyrowicz

Reservation wages and expected wages constitute different categories, both conceptually and empirically. The aim of this article is the construction of a method for inferring the adequacy of both kinds of wage expectations among persons who are not employed. This method is used to verify the hypothesis about the adequacy of reservation wages and expected wages among the unemployed in Poland. The key element of the analysis in this study is to what extent the reservation wages and wage expectations of the unemployed are in alignment with market conditions. We exploit a unique source of data on expected wages (National Bank of Poland survey) as well as data on reservation wages (Labour Force Survey) and develop a series of parametric and non-parametric counterfactual distributions for the registered unemployed. Our results indicate that expected wages are higher than reservation wages and continue to be positively correlated with wage pressure. We find that reservation wages in Poland from 2011 to 2014 were not excessive. This is important because if the wage expectations of the unemployed are in excess of market evaluation, unemployment and wage pressures prevail.

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File URL: http://gospodarkanarodowa.sgh.waw.pl/p/gospodarka_narodowa_2015_06_03.pdf
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Article provided by Warsaw School of Economics in its journal Gospodarka Narodowa.

Volume (Year): (2015)
Issue (Month): 6 ()
Pages: 51-69

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Handle: RePEc:sgh:gosnar:y:2015:i:6:p:51-69
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  1. Myck, Michal & Nicinska, Anna & Morawski, Leszek, 2009. "Count Your Hours: Returns to Education in Poland," IZA Discussion Papers 4332, Institute for the Study of Labor (IZA).
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  7. Lancaster, Tony & Chesher, Andrew, 1983. "An Econometric Analysis of Reservation Wages," Econometrica, Econometric Society, vol. 51(6), pages 1661-1676, November.
  8. Andrew Newell & Mieczyslaw W. Socha, 2007. "The Polish wage inequality explosion," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 15, pages 733-758, October.
  9. Alan B. Krueger & Andreas I. Mueller, 2016. "A Contribution to the Empirics of Reservation Wages," American Economic Journal: Economic Policy, American Economic Association, vol. 8(1), pages 142-179, February.
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  11. Peter A. Diamond, 1982. "Wage Determination and Efficiency in Search Equilibrium," Review of Economic Studies, Oxford University Press, vol. 49(2), pages 217-227.
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  14. Mortensen, Dale T, 1982. "Property Rights and Efficiency in Mating, Racing, and Related Games," American Economic Review, American Economic Association, vol. 72(5), pages 968-979, December.
  15. Pissarides, Christopher A, 1985. "Short-run Equilibrium Dynamics of Unemployment Vacancies, and Real Wages," American Economic Review, American Economic Association, vol. 75(4), pages 676-690, September.
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