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

Eswar Prasad

No 694, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: This paper provides new empirical evidence on the relationship between reservation wages of unemployed workers and macroeconomic factors – including aggregate and local unemployment rates, generosity of the unemployment compensation system and characteristics of the wage structure – as well as individual-specific determinants, including proxies for general and specific human capital, length of unemployment spell and alternative income sources. The longitudinal aspect of the dataset (the German Socio-Economic Panel) provides an interesting perspective on how reservation wages change over time and how they correlate with accepted wage offers for workers who make the transition from unemployment to employment. The findings have important policy implications as well, since they shed some light on the disincentive effects of the German tax and transfer system for the labor supply and employment decisions of unemployed workers at different points of the skill/offer wage distribution.

Keywords: reservation wage; labor supply disincentives; offer wage distribution; unemployment and employment determinants (search for similar items in EconPapers)
JEL-codes: J3 J6 (search for similar items in EconPapers)
Pages: 29 pages
Date: 2003-01
New Economics Papers: this item is included in nep-eec, nep-lab and nep-pke
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (40)

Published - published in: Gabriel Fagan, Francesco Mongelli and Julian Morgan (eds.), Institutions and Wage Formation in the New Europe: Proceedings of the ECB's Annual Labor Market Workshop, London: Edward Elgar, 2004

Downloads: (external link)
https://docs.iza.org/dp694.pdf (application/pdf)

Related works:
Working Paper: What Determines the Reservation Wages of Unemployed Workers? New Evidence From German Micro Data (2003)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:iza:izadps:dp694

Ordering information: This working paper can be ordered from
IZA, Margard Ody, P.O. Box 7240, D-53072 Bonn, Germany

Access Statistics for this paper

More papers in IZA Discussion Papers from Institute of Labor Economics (IZA) IZA, P.O. Box 7240, D-53072 Bonn, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Holger Hinte ().