Wage aspirations and unemployment persistence

Vincent Hogan ()

No 200310, Working Papers from School of Economics, University College Dublin

Abstract: The reservation wage is an integral part of most theories of involuntary unemployment. We use panel data to examine the empirical determinants of the reservation wage - in particular the influence of previous wages - and consider what this implies for the evolution of the natural rate of unemployment. We find that previous wages have a signiÞcant but relatively small effect on reservation wages (an elasticity between 0.15 and 0.47). We also find considerable differences across genders with previous wages being more important for men and market wages being more important for women. Overall our results suggest that unemployment will adjust relatively quickly to shocks.

Keywords: Unemployment duration; Wages; Unemployment--Effect of wages on; Wages (search for similar items in EconPapers)
JEL-codes: E24 J64 (search for similar items in EconPapers)
Date: 2003-04
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http://hdl.handle.net/10197/935 First version, 2003 (application/pdf)

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Journal Article: Wage aspirations and unemployment persistence (2004)
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