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Reservation Wages, Offered Wages, and Unemployment Duration ; New Empirical Evidence

  • Björn Christensen
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    This paper studies the reservation wages of unemployed persons and the wages offered them in Germany from 1987 to 1998, whereby special focus is placed on unemployment duration. The results of the study indicate that in contrast to reservation wages, offered wages decline considerably with duration of unemployment. This is the main reason that ratios of reserva­tion wages to offered wages increase rapidly with duration of unemploy­ment; on average, reservation wages begin to exceed offered wages after nine months of unemployment. Thus, the chance that long-term unem­ployed persons will receive a wage offer that is higher than their own reservation wage is extremely slight.

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    Paper provided by Kiel Institute for the World Economy in its series Kiel Working Papers with number 1095.

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    Length: 25 pages
    Date of creation: Jan 2002
    Date of revision:
    Handle: RePEc:kie:kieliw:1095
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    1. Hilmar Schneider & Olaf Fuchs, 2000. "Anreizwirkungen der Arbeitslosenunterstützung auf die Arbeitssuche," Wirtschaft im Wandel, Halle Institute for Economic Research, vol. 6(11), pages 312-317.
    2. Heckman, James J, 1979. "Sample Selection Bias as a Specification Error," Econometrica, Econometric Society, vol. 47(1), pages 153-61, January.
    3. White, Halbert, 1980. "A Heteroskedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity," Econometrica, Econometric Society, vol. 48(4), pages 817-38, May.
    4. Guenter Lang, 2000. "Native-Immigrant Wage Differentials in Germany - Assimilation, Discrimination, or Human Capital?," Discussion Paper Series 197, Universitaet Augsburg, Institute for Economics.
    5. Enswar Prasad, 2001. "The Dynamics of Reservation Wages: Preliminary Evidence from the GSOEP," Vierteljahrshefte zur Wirtschaftsforschung / Quarterly Journal of Economic Research, DIW Berlin, German Institute for Economic Research, vol. 70(1), pages 44-50.
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