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Determinants of reservation wages: empirical evidence for Estonia

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  • Liina Malk

Abstract

This paper provides an empirical analysis of the individual and macroeconomic determinants of reservation wages with a particular focus on the influence of unemployment duration. Data from the Estonian Labour Force Survey 2011–2013 and instrumental variable regression analysis are used for estimating the determinants of reservation wages. The findings indicate that personal characteristics, the household’s income level and the regional unemployment rate are important factors that affect reservation wage setting. In addition, it appears that unemployment duration has a significant negative influence on the reservation wage, which is mainly driven by men and older individuals

Suggested Citation

  • 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.
    • Handle: RePEc:eea:boewps:wp2014-8
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    File URL: http://www.eestipank.ee/sites/eestipank.ee/files/publication/en/WorkingPapers/2014/wp08_2014.pdf
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    References listed on IDEAS

    as
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    Cited by:

    1. Hila Axelrad & Israel Luski & Miki Malul, 2017. "Reservation Wages and the Unemployment of Older Workers," Journal of Labor Research, Springer, vol. 38(2), pages 206-227, June.

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    More about this item

    Keywords

    unemployment; reservation wage; unemployment duration; instrumental variable regression;
    All these keywords.

    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search

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