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Reservation Wages and Starting Wages

  • van Ophem, Hans

    ()

    (University of Amsterdam)

  • Hartog, Joop

    ()

    (University of Amsterdam)

  • Berkhout, Peter

    ()

    (RIGO Research Institute)

We analyse a unique data set that combines reservation wage and actually paid wage for a large sample of Dutch recent higher education graduates. On average, accepted wages are almost 8% higher than reservation wages, but there is no fixed proportionality. We find that the difference between reservation wage and accepted wage is virtually random, as search theory predicts. We also find that most information contained in the accepted wage is included in the reservation wage, as one would predict if individuals are well informed about the wage structure that characterizes their labour market.

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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 5435.

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Length: 37 pages
Date of creation: Jan 2011
Date of revision:
Handle: RePEc:iza:izadps:dp5435
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