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A Contribution to the Empirics of Reservation Wages

Alan Krueger and Andreas Mueller

American Economic Journal: Economic Policy, 2016, vol. 8, issue 1, 142-79

Abstract: This paper provides evidence on the behavior of reservation wages over the spell of unemployment, using high-frequency longitudinal data on unemployed workers in New Jersey. In comparison to a calibrated job search model, the reservation wage starts out too high and declines too slowly, on average, suggesting that many workers persistently misjudge their prospects or anchor their reservation wage on their previous wage. The longitudinal nature of the data also allows for testing the relationship between job acceptance and the reservation wage, where the reservation wage is measured from a previous interview to avoid bias due to cognitive dissonance. (JEL J22, J31, J64)

JEL-codes: J22 J31 J64 (search for similar items in EconPapers)
Date: 2016
Note: DOI: 10.1257/pol.20140211
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Working Paper: A Contribution to the Empirics of Reservation Wages (2014) Downloads
Working Paper: A Contribution to the Empirics of Reservation Wages (2014) Downloads
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Handle: RePEc:aea:aejpol:v:8:y:2016:i:1:p:142-79