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An alternative method of estimating the worker's reservation wage

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  • Madhu Mohanty

Abstract

This study follows the standard bivariate decision theory of employment and proposes an alternative technique to estimate reservation wages of employed, unemployed and out-of-labor-force (OLF) workers. The validity of this approach is demonstrated by testing several reservation wage hypotheses recommended in earlier studies. Using reservation wages estimated under this new approach, the study further examines the determinants of this important variable.

Suggested Citation

  • Madhu Mohanty, 2005. "An alternative method of estimating the worker's reservation wage," International Economic Journal, Taylor & Francis Journals, vol. 19(4), pages 501-522.
    • Handle: RePEc:taf:intecj:v:19:y:2005:i:4:p:501-522
    DOI: 10.1080/10168730500382170
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    References listed on IDEAS

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    1. Meng, Chun-Lo & Schmidt, Peter, 1985. "On the Cost of Partial Observability in the Bivariate Probit Model," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 26(1), pages 71-85, February.
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    3. Kristina Nyström & Gulzat Zhetibaeva Elvung, 2015. "New Firms as Employers: The Wage Penalty for Voluntary and Involuntary Job Switchers," LABOUR, CEIS, vol. 29(4), pages 348-366, December.

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