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Reservation Wages, Search Duration, and Accepted Wages in Europe

Author

Listed:
  • Addison, John T.

    (Durham University Business School)

  • Centeno, Mario

    (Banco de Portugal)

  • Portugal, Pedro

    (Banco de Portugal)

Abstract

This paper uses data from the European Community Household Panel, 1994-99, to investigate the arrival rate of job offers, the determinants of reservation wages, transitions out of unemployment, and accepted wages. In this exploratory treatment, we report that the arrival rate of job offers declines precipitously with jobless duration and age; that reservation wages do decline with the jobless spell (and aggregate unemployment); that transitions out of unemployment exhibit strong negative duration dependence for reasons that have more to do with the arrival rate of job offers than with reservation wages; and that the decline in reemployment wages with joblessness closely shadows the corresponding fall in reservation wages.

Suggested Citation

  • Addison, John T. & Centeno, Mario & Portugal, Pedro, 2004. "Reservation Wages, Search Duration, and Accepted Wages in Europe," IZA Discussion Papers 1252, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp1252
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    References listed on IDEAS

    as
    1. John T. Addison & Pedro Portugal, 2003. "Unemployment Duration Competing and Defective Risks," Journal of Human Resources, University of Wisconsin Press, vol. 38(1).
    2. Stephen R. G. Jones, 1988. "The Relationship Between Unemployment Spells and Reservation Wages as a Test of Search Theory," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 103(4), pages 741-765.
    3. Lancaster, Tony, 1985. "Simultaneous equations models in applied search theory," Journal of Econometrics, Elsevier, vol. 28(1), pages 113-126, April.
    4. Mr. Eswar S Prasad, 2003. "What Determines the Reservation Wages of Unemployed Workers? New Evidence From German Micro Data," IMF Working Papers 2003/004, International Monetary Fund.
    5. Gorter, Dirk & Gorter, Cees, 1993. "The Relation between Unemployment Benefits, the Reservation Wage and Search Duration," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 55(2), pages 199-214, May.
    6. Kiefer, Nicholas M & Neumann, George R, 1979. "An Empirical Job-Search Model, with a Test of the Constant Reservation-Wage Hypothesis," Journal of Political Economy, University of Chicago Press, vol. 87(1), pages 89-107, February.
    7. Jones, Stephen R G, 1989. "Reservation Wages and the Cost of Unemployment," Economica, London School of Economics and Political Science, vol. 56(222), pages 225-246, May.
    8. Addison, John T & Portugal, Pedro, 1989. "Job Displacement, Relative Wage Changes, and Duration of Unemployment," Journal of Labor Economics, University of Chicago Press, vol. 7(3), pages 281-302, July.
    9. Lancaster, Tony & Chesher, Andrew, 1983. "An Econometric Analysis of Reservation Wages," Econometrica, Econometric Society, vol. 51(6), pages 1661-1676, November.
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    reservation wages; job offer arrival rates; unemployment duration; reemployment wages;
    All these keywords.

    JEL classification:

    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
    • J65 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment Insurance; Severance Pay; Plant Closings

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