Reservation wages, labour market participation and health

Sarah Brown (), Jennifer Roberts and Karl Taylor

Journal of the Royal Statistical Society Series A, 2010, vol. 173, issue 3, 501-529

Abstract: Summary. The concept of the reservation wage has played an important role in labour market theory, particularly in models of job search, labour supply and labour market participation. We focus on the determinants of reservation wages, with a particular focus on health, which has attracted very little attention despite its importance from a policy perspective. Using UK data we estimate an endogenous switching model which predicts reservation wages for the unemployed and market wages for the employed. Our results have important policy implications since they suggest that poor health is a major cause of economic inactivity.

Date: 2010
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https://doi.org/10.1111/j.1467-985X.2009.00638.x

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Working Paper: RESERVATION WAGES, LABOUR MARKET PARTICIPATION AND HEALTH (2008)
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