Unemployment Benefits and Reservation Wages: Key Elasticities from a Stripped-Down Job Search Approach

22 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

This paper exploits survey information on reservation wages and data on actual wages from the European Community Household Panel to deduce in the manner of Lancaster and Chesher (1983) additional parameters of a stylized structural search model; specifically, reservation wage and transition/duration elasticities. The informational requirements of this approach are minimal, thereby facilitating comparisons between countries. Further, its policy content is immediate insofar as the impact of unemployment benefit rules and measures increasing the arrival rate of job offers are concerned. These key elasticities are computed for the United Kingdom and eleven other European nations.

Keywords: wage offer distributions, reservation wages, arrival rate of job offers, unemployment benefits, probability of reemployment, accepted wages

JEL Classification: J64, J65

Suggested Citation

Addison, John T. and Gomes de Freitas Centeno, Mário José and Portugal, Pedro, Unemployment Benefits and Reservation Wages: Key Elasticities from a Stripped-Down Job Search Approach. IZA Discussion Paper No. 3357. Available at SSRN: https://ssrn.com/abstract=1294526 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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Technical University of Lisbon - ISEG (School of Economis and Management)

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HOME PAGE: http://www.iseg.utl.pt/docentes/docentes.php?qual=1249

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

ISEG/UTL, Rua Miguel Lupi 20
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Pedro Portugal

Bank of Portugal - Research Department ( email )

Av. Almirante Reis 71, 6th
Lisbon 1150-012
Portugal
+351 21 313 0000 (Phone)
+351 21 814 3841 (Fax)

New University of Lisbon

Lisbon, 1099-085
Portugal

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

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