Reservation wages: explaining some puzzling regional patterns

Paolo Sestito and Eliana Viviano

No 696, Temi di discussione (Economic working papers) from Bank of Italy, Economic Research and International Relations Area

Abstract: We use the Italian Labour Force Survey and the European Household Panel Survey to analyse the distribution of the reservation wages reported by jobseekers. In Italy, reservation wages appear to be higher in the South - the low income and high unemployment area of the country - than in the North and Centre. A similar, rather counterintuitive, pattern, however, can also be found in Finland, France and Spain. First, we show that the way in which these data are commonly collected generates double selection bias. Second, we show that this bias has a strong effect on the estimation of the geographical pattern of reservation wages in many countries. The size of this bias is substantial in Italy. When controlling for it, reservation wages are 10 per cent higher in the North and Centre than in the South.

Keywords: reservation wages; sample selection; regional differentials (search for similar items in EconPapers)
JEL-codes: J22 J64 R23 (search for similar items in EconPapers)
Date: 2008-12
New Economics Papers: this item is included in nep-eec, nep-geo and nep-lab
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

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Related works:
Journal Article: Reservation Wages: Explaining Some Puzzling Regional Patterns (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:bdi:wptemi:td_696_08

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