Do Reservation Wages Really Decline? Some International Evidence on the Determinants of Reservation Wages

13 Pages Posted: 3 Nov 2008

See all articles by John T. Addison

John T. Addison

University of South Carolina - Moore School of Business - Department of Economics; IZA Institute of Labor Economics

Mário Centeno

Bank of Portugal - Research Department; Technical University of Lisbon - ISEG (School of Economis and Management); UECE (Research Unit on Complexity and Economics)

Pedro Portugal

Bank of Portugal - Research Department; New University of Lisbon; IZA Institute of Labor Economics

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Abstract

Using cross-country data, we investigate the determinants of reservation wages and their course over the jobless spell. Higher unemployment benefits lead to higher reservation wages. Further, again consistent with the basic search model, repeated observations on the same individual provide scant evidence of declining reservation wages.

Keywords: reservation wages, probability of reemployment, arrival rate of job offers, unemployment benefits

JEL Classification: J64, J65

Suggested Citation

Addison, John T. and Gomes de Freitas Centeno, Mário José and Portugal, Pedro, Do Reservation Wages Really Decline? Some International Evidence on the Determinants of Reservation Wages. IZA Discussion Paper No. 3289. Available at SSRN: https://ssrn.com/abstract=1294519 or http://dx.doi.org/10.1111/j.0042-7092.2007.00700.x

John T. Addison (Contact Author)

University of South Carolina - Moore School of Business - Department of Economics ( email )

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IZA Institute of Labor Economics

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Mário José Gomes de Freitas Centeno

Bank of Portugal - Research Department ( email )

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UECE (Research Unit on Complexity and Economics) ( email )

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Pedro Portugal

Bank of Portugal - Research Department ( email )

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+351 21 814 3841 (Fax)

New University of Lisbon

Lisbon, 1099-085
Portugal

IZA Institute of Labor Economics

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Bonn, D-53072
Germany

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