What Determines the Reservation Wages of Unemployed Workers? New Evidence From German Micro Data

Eswar Prasad

No 2003/004, IMF Working Papers from International Monetary Fund

Abstract: This paper provides new empirical evidence on the relationship between reservation wages of unemployed workers and macroeconomic factors--including the unemployment rate and generosity of the unemployment compensation system--as well as individual-specific determinants, such as human capital proxies and length of unemployment spell. The longitudinal dataset provides an interesting perspective on how reservation wages change over time and how they correlate with accepted wage offers for workers who move from unemployment to employment. The findings shed light on the disincentive effects of the German tax and transfer system for the employment decisions of unemployed workers at different skill levels.

Keywords: WP; reservation wage; worker; real wage; wage differential; labor supply disincentives; offer wage distribution; unemployment and employment determinants; unemployment compensation; duration variable; search costs; wage distribution; household income; reservation wage data; unemployment duration; Wages; Unemployment; Unemployment rate; Labor supply; Income (search for similar items in EconPapers)
Pages: 23
Date: 2003-01-01
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Citations: View citations in EconPapers (39)

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Working Paper: What Determines the Reservation Wages of Unemployed Workers? New Evidence from German Micro Data (2003)
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