Reservation Wages and Starting Wages

37 Pages Posted: 24 Jan 2011

See all articles by Hans van Ophem

Hans van Ophem

University of Amsterdam - Faculty of Economics and Business (FEB); Tinbergen Institute

Joop Hartog

University of Amsterdam - Faculty of Economics and Business (FEB); Tinbergen Institute; CESifo (Center for Economic Studies and Ifo Institute); IZA Institute of Labor Economics

Peter H. G. Berkhout

University of Amsterdam - SEO Economic Research

Abstract

We analyse a unique data set that combines reservation wage and actually paid wage for a large sample of Dutch recent higher education graduates. On average, accepted wages are almost 8% higher than reservation wages, but there is no fixed proportionality. We find that the difference between reservation wage and accepted wage is virtually random, as search theory predicts. We also find that most information contained in the accepted wage is included in the reservation wage, as one would predict if individuals are well informed about the wage structure that characterizes their labour market.

Keywords: reservation wages, starting wages, job search

JEL Classification: J31, J69

Suggested Citation

van Ophem, Hans and Hartog, Joop and Berkhout, Peter H. G., Reservation Wages and Starting Wages. IZA Discussion Paper No. 5435. Available at SSRN: https://ssrn.com/abstract=1745710

Hans Van Ophem (Contact Author)

University of Amsterdam - Faculty of Economics and Business (FEB) ( email )

Roetersstraat 11
Amsterdam, 1018 WB
Netherlands

Tinbergen Institute

Burg. Oudlaan 50
Rotterdam, 3062 PA
Netherlands

Joop Hartog

University of Amsterdam - Faculty of Economics and Business (FEB) ( email )

Roetersstraat 11
Amsterdam, 1018 WB
Netherlands

Tinbergen Institute

Burg. Oudlaan 50
Rotterdam, 3062 PA
Netherlands

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

IZA Institute of Labor Economics

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

Peter H. G. Berkhout

University of Amsterdam - SEO Economic Research ( email )

Roetersstraat 29
Amsterdam, 1018 WB
Netherlands

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