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Youth unemployment, firm size and reservation wages in South Africa

  • Rankin, Neil A.
  • Roberts, Gareth A.

Youth unemployment in South Africa is high. We investigate whether one of the reasons may be that the wages young people want or need are above those that they could reasonably expect to earn given their characteristics. Unlike previous work on the relationship between reservation wages and unemployment we differentiate between wages in different sizes of firms. Larger firms pay more and thus, even if reservation wages are similar to average predicted wages they may be above wages that young people could expect to earn in smaller firms. We find that this is the case.

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File URL: http://mpra.ub.uni-muenchen.de/24027/1/MPRA_paper_24027.pdf
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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 24027.

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Date of creation: 2010
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Handle: RePEc:pra:mprapa:24027
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  1. Abhijit Banerjee & Sebastian Galiani & Jim Levinsohn & Zoë McLaren & Ingrid Woolard, 2007. "Why Has Unemployment Risen in the New South Africa," NBER Working Papers 13167, National Bureau of Economic Research, Inc.
  2. Heckman, James J, 1979. "Sample Selection Bias as a Specification Error," Econometrica, Econometric Society, vol. 47(1), pages 153-61, January.
  3. Dubin, Jeffrey A & McFadden, Daniel L, 1984. "An Econometric Analysis of Residential Electric Appliance Holdings and Consumption," Econometrica, Econometric Society, vol. 52(2), pages 345-62, March.
  4. Eckstein, Zvi & van den Berg, Gerard J, 2004. "Empirical Labour Search: A Survey," CEPR Discussion Papers 4199, C.E.P.R. Discussion Papers.
  5. Fernandez, Ana I. & Rodriguez-Poo, Juan M. & Sperlich, Stefan, 2001. "A note on the parametric three step estimator in structural labor supply models," Economics Letters, Elsevier, vol. 74(1), pages 31-41, December.
  6. James Heintz & Dorrit Posel, 2008. "Revisiting Informal Employment And Segmentation In The South African Labour Market," South African Journal of Economics, Economic Society of South Africa, vol. 76(1), pages 26-44, 03.
  7. Nicoli Nattrass & Richard Walker, 2005. "Unemployment And Reservation Wages In Working-Class Cape Town," South African Journal of Economics, Economic Society of South Africa, vol. 73(3), pages 498-509, 09.
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