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Individual Wealth, Reservation Wages, and Transitions into Employment

  • Hans Bloemen

    (CentER (CentER))

  • Elena Stancanelli

    (Théorie économique, modélisation et applications (THEMA))

We investigate the relationship between financial wealth, reservation wages, and labor market transitions. Wealth is assumed to affect the level of the reservation wage and the employment probability. We test for the validity of this assumption by estimating a simultaneous‐equations model of reservation wages, labor market transitions, and wealth. The data used for the analysis relate to a sample of unemployed job searchers. We use subjective information on the reservation wage. Wealth is found to have a significantly positive impact on the reservation wage. The overall impact of wealth on the employment probability is negative though small.

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Paper provided by Sciences Po in its series Sciences Po publications with number info:hdl:2441/9704.

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Date of creation: Apr 2001
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Publication status: Published in Journal of Labor Economics, 2001, vol. 19, pp.400-439
Handle: RePEc:spo:wpmain:info:hdl:2441/9704
Contact details of provider: Web page: http://www.sciencespo.fr/

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  1. Berg, G.J. van den & Gorter, C., 1996. "Job search and commuting time," Serie Research Memoranda 0001, VU University Amsterdam, Faculty of Economics, Business Administration and Econometrics.
  2. Silvio Rendon, 2002. "Job search and asset accumulation under borrowing constraints," Economics Working Papers 649, Department of Economics and Business, Universitat Pompeu Fabra.
  3. Bloemen, H.G., 1995. "The relation between wealth and labour market transitions : An empirical study for the Netherlands," Discussion Paper 1995-99, Tilburg University, Center for Economic Research.
  4. Bekker, Paul A, 1994. "Alternative Approximations to the Distributions of Instrumental Variable Estimators," Econometrica, Econometric Society, vol. 62(3), pages 657-81, May.
  5. Douglas Staiger & James H. Stock, 1994. "Instrumental Variables Regression with Weak Instruments," NBER Technical Working Papers 0151, National Bureau of Economic Research, Inc.
  6. Atkinson, Anthony B & Micklewright, John, 1991. "Unemployment Compensation and Labor Market Transitions: A Critical Review," Journal of Economic Literature, American Economic Association, vol. 29(4), pages 1679-1727, December.
  7. repec:dgr:kubcen:97.81 is not listed on IDEAS
  8. Olivier Jean Blanchard & Peter Diamond, 1990. "Ranking, Unemployment Duration, and Wages," NBER Working Papers 3387, National Bureau of Economic Research, Inc.
  9. van den Berg, Gerard J, 1990. "Nonstationarity in Job Search Theory," Review of Economic Studies, Wiley Blackwell, vol. 57(2), pages 255-77, April.
  10. Devine, Theresa J. & Kiefer, Nicolas M., 1991. "Empirical Labor Economics: The Search Approach," OUP Catalogue, Oxford University Press, number 9780195059366, March.
  11. Richard Blundell & Thierry Magnac & Costas Meghir, 1996. "Savings and labour market transitions," IFS Working Papers W96/05, Institute for Fiscal Studies.
  12. Denis Fougère & Jacqueline Pradel & Muriel Roger, 1998. "The Influence of the State Employment Service on the Search Effort and on the Probability of Leaving Unemployment," Working Papers 98-36, Centre de Recherche en Economie et Statistique.
  13. repec:dgr:kubcen:199599 is not listed on IDEAS
  14. Lancaster, Tony & Chesher, Andrew, 1983. "An Econometric Analysis of Reservation Wages," Econometrica, Econometric Society, vol. 51(6), pages 1661-76, November.
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