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Reservation Wages, Search Duration, and Accepted Wages in Europe

Author

Listed:
  • Addison, John T.

    () (University of South Carolina)

  • 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 for the Study of Labor (IZA).
  • Handle: RePEc:iza:izadps:dp1252
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    References listed on IDEAS

    as
    1. 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.
    2. 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.
    3. 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.
    4. Lancaster, Tony & Chesher, Andrew, 1983. "An Econometric Analysis of Reservation Wages," Econometrica, Econometric Society, vol. 51(6), pages 1661-1676, November.
    5. Stephen R. G. Jones, 1988. "The Relationship Between Unemployment Spells and Reservation Wages as a Test of Search Theory," The Quarterly Journal of Economics, Oxford University Press, vol. 103(4), pages 741-765.
    6. Christopher J. Flinn, 1986. "Econometric Analysis of CPS-Type Unemployment Data," Journal of Human Resources, University of Wisconsin Press, vol. 21(4), pages 456-484.
    7. Lancaster, Tony, 1985. "Simultaneous equations models in applied search theory," Journal of Econometrics, Elsevier, vol. 28(1), pages 113-126, April.
    8. John T. Addison & Pedro Portugal, 2003. "Unemployment Duration Competing and Defective Risks," Journal of Human Resources, University of Wisconsin Press, vol. 38(1).
    9. Eswar S Prasad, 2003. "What Determines the Reservation Wages of Unemployed Workers? New Evidence From German Micro Data," IMF Working Papers 03/4, International Monetary Fund.
    10. 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.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. John T. Addison & Mário Centeno & Pedro Portugal, 2010. "Unemployment Benefits and Reservation Wages: Key Elasticities from a Stripped-Down Job Search Approach," Economica, London School of Economics and Political Science, vol. 77(305), pages 46-59, January.
    2. Addison, John T. & Centeno, Mario & Portugal, Pedro, 2004. "Key Elasticities in Job Search Theory: International Evidence," IZA Discussion Papers 1314, Institute for the Study of Labor (IZA).
    3. repec:spr:jlabre:v:38:y:2017:i:2:d:10.1007_s12122-017-9247-6 is not listed on IDEAS
    4. John T. Addison & Mário Centeno & Pedro Portugal, 2004. "Key Elasticities in Job Search Theory: International Evidence," Working Papers w200412, Banco de Portugal, Economics and Research Department.
    5. Centeno, Luis & Centeno, Mário & Novo, Álvaro A., 2009. "Evaluating job-search programs for old and young individuals: Heterogeneous impact on unemployment duration," Labour Economics, Elsevier, vol. 16(1), pages 12-25, January.
    6. Sarah Brown & Jennifer Roberts & Karl Taylor, 2010. "Reservation wages, labour market participation and health," Journal of the Royal Statistical Society Series A, Royal Statistical Society, vol. 173(3), pages 501-529.
    7. Llaudes, Ricardo, 2005. "The Phillips curve and long-term unemployment," Working Paper Series 441, European Central Bank.
    8. Antonio Accetturo & Luigi Infante, 2013. "Skills or culture? An analysis of the decision to work by immigrant women in Italy," IZA Journal of Migration and Development, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 2(1), pages 1-21, December.
    9. John T. Addison & José A. F. Machado & Pedro Portugal, 2010. "The Reservation Wage Unemployment Duration Nexus," Working Papers w201026, Banco de Portugal, Economics and Research Department.
    10. Nüß, Patrick, 2017. "Duration Dependence as an Unemployment Stigma: Evidence from a Field Experiment in Germany," GLO Discussion Paper Series 88, Global Labor Organization (GLO).
    11. Gutknecht, Daniel, 2016. "Testing for monotonicity under endogeneity," Journal of Econometrics, Elsevier, vol. 190(1), pages 100-114.
    12. John T. Addison & José A. F. Machado & Pedro Portugal, 2013. "The Reservation Wage Unemployment Duration Nexus," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 75(6), pages 980-987, December.
    13. Christl, Michael & Köppl Turyna, Monika & Kucsera, Denes, 2015. "Employment effects of minimum wages in Europe revisited," MPRA Paper 65761, University Library of Munich, Germany.
    14. Fernández-Blanco, Javier & Preugschat, Edgar, 2018. "On the effects of ranking by unemployment duration," European Economic Review, Elsevier, vol. 104(C), pages 92-110.
    15. repec:wrk:warwec:991 is not listed on IDEAS
    16. Cecilia Garavito Masalías, 2010. "Vulnerabilidad en el empleo, género y etnicidad en el Perú," Revista Economía, Fondo Editorial - Pontificia Universidad Católica del Perú, vol. 33(66), pages 89-127.
    17. repec:spr:jlabrs:v:52:y:2018:i:1:d:10.1186_s12651-018-0237-9 is not listed on IDEAS
    18. Nordlund, Madelende & Strandh, Mattias, 2014. "The relation between economic and non-economic incentives to work and employment chances among the unemployed," Working Paper Series 2014:23, IFAU - Institute for Evaluation of Labour Market and Education Policy.
    19. Paolo Sestito & Eliana Viviano, 2011. "Reservation Wages: Explaining Some Puzzling Regional Patterns," LABOUR, CEIS, vol. 25(1), pages 63-88, March.
    20. Akiko Maruyama, 2016. "One-sided learning about one's own type in a two-sided search model," GRIPS Discussion Papers 15-26, National Graduate Institute for Policy Studies.
    21. Chiara Mussida & Dario Sciulli, 2016. "The trend over time of labour market opportunities for young people in Italy," Economia Politica: Journal of Analytical and Institutional Economics, Springer;Fondazione Edison, vol. 33(2), pages 291-321, August.
    22. Ana Rute Cardoso & Paulo Guimarães & Pedro Portugal, 2013. "Everything you always wanted to know about sex discrimination," Working Papers w201302, Banco de Portugal, Economics and Research Department.

    More about this item

    Keywords

    reservation wages; job offer arrival rates; unemployment duration; reemployment wages;

    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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