Reservation Wages and Labor Supply

Iris Kesternich, Heiner Schumacher, Bettina Siflinger and Franziska Valder

No 8348, CESifo Working Paper Series from CESifo

Abstract: Survey measures of the reservation wage reflect both the consumption-leisure trade-off and job search concerns (the arrival rate of job offers and the wage distribution). We examine what a survey measure of the reservation wage reveals about labor supply when search concerns are absent. To this end, we combine the reservation wage measure from a large labor market survey with the reservation wage for a one-hour job that we elicit in an online experiment. The two measures show a strong positive association. For unemployed individuals, the experimental reservation wage increases on average by around one Euro for every Euro increase in the survey measure. For employed individuals, the association between the two measures is weaker, but still positive and statistically significant. We show that these results are robust to selection into the experiment, and that demographic variables have a similar influence on both reservation wage measures.

Keywords: reservation wage; labor supply; search; validation of survey measures (search for similar items in EconPapers)
JEL-codes: C83 C91 J22 (search for similar items in EconPapers)
Date: 2020
New Economics Papers: this item is included in nep-exp and nep-lma
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Related works:
Journal Article: Reservation wages and labor supply (2022)
Working Paper: Reservation Wages and Labor Supply (2018)
Working Paper: Reservation Wages and Labor Supply (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_8348

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