Reservation Wages and Labor Supply

CentER Discussion Paper Nr. 2018-054

9 Pages Posted: 3 Jan 2019

See all articles by Iris Kesternich

Iris Kesternich

KU Leuven - Department of Economics; Ludwig Maximilian University of Munich (LMU) - Faculty of Economics

Heiner Schumacher

KU Leuven

Bettina Siflinger

University of Mannheim - Department of Economics

Franziska Valder

KU Leuven

Multiple version iconThere are 2 versions of this paper

Date Written: December 17, 2018

Abstract

We test what survey measures of the reservation wage reveal about individual labor supply, i.e., an individual’s willingness to substitute leisure by consumption. To this end, we combine the reservation wage measure from a large labor market survey with the reservation wage for a one-hour job that we elicit in an online experiment. We find that these two measures are highly correlated. On average, the experimental reservation wage increases by 50 Cents for every Euro increase in the survey measure.

Keywords: Reservation Wage, Labor Supply, Search, Validation of Survey Measures

JEL Classification: C83, C91, J22

Suggested Citation

Kesternich, Iris and Schumacher, Heiner and Siflinger, Bettina and Valder, Franziska, Reservation Wages and Labor Supply (December 17, 2018). CentER Discussion Paper Nr. 2018-054, Available at SSRN: https://ssrn.com/abstract=3303856 or http://dx.doi.org/10.2139/ssrn.3303856

Iris Kesternich (Contact Author)

KU Leuven - Department of Economics ( email )

Leuven, B-3000
Belgium

Ludwig Maximilian University of Munich (LMU) - Faculty of Economics ( email )

Ludwigstrasse 28
Munich, D-80539
Germany

Heiner Schumacher

KU Leuven ( email )

Oude Markt 13
Leuven, Vlaams-Brabant 3000
Belgium

Bettina Siflinger

University of Mannheim - Department of Economics ( email )

D-68131 Mannheim
Germany

Franziska Valder

KU Leuven ( email )

Oude Markt 13
Leuven, Vlaams-Brabant 3000
Belgium

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