Andreas Mueller

Reservation Wages over the Spell of Unemployment: Evidence from High-Frequency Longitudinal Data

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Abstract:
This paper provides new evidence on the behavior of reservation wages over the spell of unemployment. Using data from the survey of unemployed workers in NJ, where unemployed workers were interviewed each week for a period of up to 24 weeks, we find that self-reported reservation wages decline at a modest rate over the spell of unemployment, with our point estimates ranging from 0.05 to 0.14 percent per week of unemployment. Furthermore, our results show that the decline in reservation wages is mostly driven by older individuals and those with savings at the start of the survey. The longitudinal nature of the data also allows testing for the relationship between reservation wages and job acceptance. We find that reservation wages from a previous interview predict job acceptance in subsequent interviews.

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