The Reservation Wage Unemployment Duration Nexus*

Using panel data from the Russian Longitudinal Monitoring Survey for 2006-2014, the paper investigates reservation wages setting in the Russian labor market. The second part of the paper provides an econometric analysis of main determinants of reservation wages. It shows that personal characteristics, household income, unemployment duration and characteristics of local labor markets are important factors that affect reservation wage setting. The findings also indicate that non-employed individuals with higher reservation wages have higher probability of re-employment and receive higher wages on their new jobs. A general conclusion is that Russian workers set reservation wages in economically rational way taking into account their real prospects in the labor market.

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Interplay Between Reservation Wage and Unemployment Duration: Evidence from Jordan, Serbia, Montenegro, Ukraine and Moldova in 2015

Business and Economic Research ◽

10.5296/ber.v10i1.15821 ◽

2019 ◽

Vol 10 (1) ◽

pp. 120

Author(s):

Tereza Kochovska

Keyword(s):

Labor Market ◽

Instrumental Variables ◽

School To Work ◽

Least Square ◽

Unemployment Duration ◽

Reservation Wage ◽

Mena Countries ◽

Reservation Wages ◽

Work Transition ◽

Cis Countries

This study investigates the reservation wage along with the unemployment duration of the youth in five countries from three groups of countries, the MENA countries, the WB countries and the CIS countries. The study assesses the determinants of the reservation wage and in particular how it is related to unemployment duration. The data comes from the School to Work Transition Survey in 2015 which is a survey that is labor market designed and includes labor market information on young people aged 15 to 29 years. The Two Stage Least Square (2SLS) model is conducted by using instrumental variables. This technique is used since we suspect that ednogeneity between the reservation wage and the unemployment duration is possible in our model. The results suggest the interplay between the reservation wage and the unemployment duration is countercyclical, the longer the unemployment duration the lower the reservation wage. Youth that lives in a household that receives other sources of income and remittances have lower reservation wages and youth that comes from a household with good financial situation and receives governmental financial assistance have higher reservation wages. Married youth with children have higher reservation wage and lower unemployment duration and more educated and trained youth has higher reservation wage.

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The Reservation Wage Unemployment Duration Nexus

SSRN Electronic Journal ◽

10.2139/ssrn.1648362 ◽

2010 ◽

Author(s):

John T. Addison ◽

José A. F. Machado ◽

Pedro Portugal

Keyword(s):

Unemployment Duration ◽

Reservation Wage

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Explicit expressions for the reservation wage path and the unemployment duration density in nonstationary job search models

Labour Economics ◽

10.1016/0927-5371(95)80053-z ◽

1995 ◽

Vol 2 (2) ◽

pp. 187-198 ◽

Cited By ~ 2

Author(s):

Gerard J. van den Berg

Keyword(s):

Job Search ◽

Unemployment Duration ◽

Reservation Wage ◽

Search Models ◽

Explicit Expressions

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Paradoxes of reservation wage setting in the Russian labor market. Part I

Voprosy Ekonomiki ◽

10.32609/0042-8736-2016-8-5-27 ◽

2016 ◽

pp. 5-27

Author(s):

R. Kapeliushnikov ◽

A. Lukyanova

Keyword(s):

Labor Market ◽

Empirical Studies ◽

Reservation Wage ◽

Wage Setting ◽

Reservation Wages ◽

Monitoring Survey ◽

Main Determinants ◽

Subjective Estimates ◽

Objective Indicators

Using panel data from the Russian Longitudinal Monitoring Survey for 2006-2014, the paper investigates reservation wages setting in the Russian labor market. The sample includes non-employed individuals wishing to get a job (both searchers and non-searchers). The first part of the paper provides a survey of previous empirical studies, describes data and analyzes subjective estimates of reservation wages in comparison with various objective indicators of actual wages. The analysis shows that wage aspirations of the majority of Russian non-employed individuals are overstated. However their wage expectations are rather flexible and decrease rapidly as the search continues that prevents high long-term unemployment. The second part of the paper provides an econometric analysis of main determinants of reservation wage and its impact on probability of re-employment and wages on searchers’ new jobs.

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