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Reservation Wages, Search Duration, and Accepted Wages in Europe

  • John T. Addison
  • Mário Centeno
  • Pedro Portugal

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.

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File URL: http://www.bportugal.pt/en-US/BdP%20Publications%20Research/WP200413.pdf
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Paper provided by Banco de Portugal, Economics and Research Department in its series Working Papers with number w200413.

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Date of creation: 2004
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Handle: RePEc:ptu:wpaper:w200413
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  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. Jones, Stephen R G, 1989. "Reservation Wages and the Cost of Unemployment," Economica, London School of Economics and Political Science, vol. 56(222), pages 225-46, May.
  3. Prasad, Eswar, 2003. "What Determines the Reservation Wages of Unemployed Workers? New Evidence from German Micro Data," IZA Discussion Papers 694, Institute for the Study of Labor (IZA).
  4. 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.
  5. 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.
  6. Jones, Stephen R G, 1988. "The Relationship between Unemployment Spells and Reservation Wages as a Test of Search Theory," The Quarterly Journal of Economics, MIT Press, vol. 103(4), pages 741-65, November.
  7. 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.
  8. Lancaster, Tony, 1985. "Simultaneous equations models in applied search theory," Journal of Econometrics, Elsevier, vol. 28(1), pages 113-126, April.
  9. Lancaster, Tony & Chesher, Andrew, 1983. "An Econometric Analysis of Reservation Wages," Econometrica, Econometric Society, vol. 51(6), pages 1661-76, November.
  10. 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.
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