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The determinants of reservation wages

Author

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  • Vincent (Vincent Peter) Hogan

Abstract

Most theories of involuntary unemployment predict that the equilibrium wage in the labor market will be greater than the reservation wage of the unemployed. These theories concentrate on explaining why the labor market does not clear, with the market wage falling to the level of the reservation wage, as predicted by the classical paradigm. Relatively little, however, has been said about the behavior of reservation wages. This paper seeks to fill the gap in the literature. We look at the empirical determinants of the reservation wage and suggest what this implies for the evolution of the natural rate of unemployment.

Suggested Citation

  • Vincent (Vincent Peter) Hogan, 1999. "The determinants of reservation wages," Working Papers 199916, School of Economics, University College Dublin.
    • Handle: RePEc:ucn:wpaper:199916
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    File URL: http://hdl.handle.net/10197/326
    File Function: First version, 1999
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    Cited by:

    1. Christensen, Björn, 2003. "Anspruchslohn und Arbeitslosigkeit in Deutschland (Reservation wage and unemployment in Germany)," Mitteilungen aus der Arbeitsmarkt- und Berufsforschung, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany], vol. 36(4), pages 573-598.
    2. Katarzyna Budnik, 2012. "Do those who stay work less? On the impact of emigration on the measured TFP in Poland," NBP Working Papers 113, Narodowy Bank Polski.
    3. Sarah Brown & Jennifer Roberts & Karl Taylor, 2010. "Reservation wages, labour market participation and health," Journal of the Royal Statistical Society Series A, Royal Statistical Society, vol. 173(3), pages 501-529, July.
    4. Christensen, Björn, 2003. "Anspruchslohn und Arbeitslosigkeit in Deutschland (Reservation wage and unemployment in Germany)," Mitteilungen aus der Arbeitsmarkt- und Berufsforschung, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany], vol. 36(4), pages 573-598.
    5. Christensen, Björn, 2001. "The Determinants of Reservation Wages in Germany Does a Motivation Gap Exist?," Kiel Working Papers 1024, Kiel Institute for the World Economy (IfW Kiel).
    6. Liina Malk, 2015. "Determinants of reservation wages: empirical evidence for Estonia," Bank of Estonia Working Papers wp2014-8, Bank of Estonia, revised 20 Jan 2015.

    More about this item

    Keywords

    Reservation wage; Labor market; Natural rate of unemployment;
    All these keywords.

    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity

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