The estimation of reservation wages: A simulation-based comparison

Julian Leppin

No 124, HWWI Research Papers from Hamburg Institute of International Economics (HWWI)

Abstract: This paper examines the predictive power of different estimation approaches for reservation wages. It applies stochastic frontier models for employed workers and the approach from Kiefer and Neumann (1979b) for unemployed workers. Furthermore, the question of whether or not reservation wages decrease over the unemployment period is addressed. This is done by a pseudo-panel with known reservation wages which uses data from the German Socio-Economic Panel as a basis. The comparison of the estimators is carried out by a Monte Carlo simulation. The best results are achieved by the cross-sectional stochastic frontier model. The Kiefer-Neumann approach failed to predict the decreasing reservation wages correctly.

Keywords: job search theory; Monte Carlo simulation; reservation wages; stochastic wage frontiers (search for similar items in EconPapers)
JEL-codes: C21 C23 J64 (search for similar items in EconPapers)
Date: 2012
New Economics Papers: this item is included in nep-ecm and nep-lab
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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Related works:
Journal Article: The Estimation of Reservation Wages: A Simulation-Based Comparison (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:hwwirp:124

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