Reservation Wages in Canadian Labour Markets

We use the stochastic frontier approach to estimate the reservation wage across different city groups in Colombia. We use the information of GEIH from 2008-2019 of 23 urban cities. We find empirical evidence in favour of the search theory predictions that suggest a positive relation of the reservation wage with the level of education and with the net family labour income. We also find a gender gap in the reservation wage and explore this gap controlling by the level of education and presence of children in the household. Contrary to the results found in the literature, we find that the presence of children reduces the reservation wage of women and men. Finally, we found that the reservation wage increases with the level of development and productivity of the cities, however, qualified workers in low-quality cities present higher reservation wages than median quality cities.

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Estimating Worker Information Gaps From A Stochastic Wage Frontier: A Study Of Canadian Labour Markets

International Business & Economics Research Journal (IBER) ◽

10.19030/iber.v6i12.3441 ◽

2011 ◽

Vol 6 (12) ◽

Author(s):

Atul A. Dar

Keyword(s):

Labour Market ◽

Job Search ◽

Imperfect Information ◽

Stochastic Frontier ◽

Geographical Location ◽

Labour Markets ◽

Reservation Wage ◽

Market Inefficiency ◽

Education And Immigration ◽

Information Gaps

In the presence of imperfect information in labour markets, optimal job search entails accepting a wage offer if it exceeds a workers reservation wage. However, this generally means that a worker with a given skill, will not earn the maximum wage on offer, and the gap between the maximum wager and the wage earned could be viewed as an indicator of labour market inefficiency arising from worker information gaps. The inefficiency arises because information is costly, so workers do not search long enough to discover the maximum wage, which would otherwise be sought and earned if information were costless. The aim of this paper is to empirically investigate the extent of labour market inefficiency within and across a number of population strata in Canada. These strata include individuals grouped according to various socio-economic and demographic characteristics such as gender, geographical location, education, and immigration status. The econometric model adopted is the stochastic frontier function used initially extensively in studies of production and cost efficiency of firms, and subsequently employed in studies of worker information gaps. The data we use are drawn from the 2001 Census of Canada.

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An Empirical Analysis of Employed and Unemployed Job Search Behavior

ILR Review ◽

10.1177/001979399204500409 ◽

1992 ◽

Vol 45 (4) ◽

pp. 738-752 ◽

Cited By ~ 13

Author(s):

David M. Blau

Keyword(s):

Standard Model ◽

Empirical Analysis ◽

Job Search ◽

Search Behavior ◽

Reduced Form ◽

Reservation Wage ◽

Job Seekers ◽

Reservation Wages ◽

Job Search Behavior ◽

Reported Data

This paper analyzes the job search activities of employed and unemployed job seekers using self-reported data from a 1980 survey. One novel finding from reduced form equations is that many searchers, both employed and unemployed, rejected at least one offer before accepting a job. The reduced form results are used to estimate reservation wages based on a fairly standard model of job search. Most of the job searchers accepted a job offer with a wage below the estimated reservation wage, suggesting that the model does not fit the data well.

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A Contribution to the Empirics of Reservation Wages

American Economic Journal Economic Policy ◽

10.1257/pol.20140211 ◽

2016 ◽

Vol 8 (1) ◽

pp. 142-179 ◽

Cited By ~ 24

Author(s):

Alan B. Krueger ◽

Andreas I. Mueller

Keyword(s):

New Jersey ◽

Longitudinal Data ◽

Cognitive Dissonance ◽

Job Search ◽

High Frequency ◽

Search Model ◽

Reservation Wage ◽

Reservation Wages ◽

The Relationship ◽

Job Acceptance

This paper provides evidence on the behavior of reservation wages over the spell of unemployment, using high-frequency longitudinal data on unemployed workers in New Jersey. In comparison to a calibrated job search model, the reservation wage starts out too high and declines too slowly, on average, suggesting that many workers persistently misjudge their prospects or anchor their reservation wage on their previous wage. The longitudinal nature of the data also allows for testing the relationship between job acceptance and the reservation wage, where the reservation wage is measured from a previous interview to avoid bias due to cognitive dissonance. (JEL J22, J31, J64)

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Economic Job Search and Decision-Making Models

10.1093/oxfordhb/9780199764921.013.021 ◽

2015 ◽

Author(s):

Gerard J. van den Berg ◽

Arne Uhlendorff

Keyword(s):

Decision Making ◽

Job Search ◽

Imperfect Information ◽

Search Behavior ◽

Search Theory ◽

Reservation Wage ◽

Search Effort ◽

Job Offers ◽

Job Search Behavior ◽

Decision Making Models

The economic job search theory is based on the assumption that individuals have imperfect information about jobs and wages. It takes time to find an acceptable job and individuals have to make decisions about their job search behavior. The optimal job search behavior is characterized by the reservation wage, that is, the wage above which job offers are accepted, and by the search effort. Both components depend on factors such as the income during job search and the probability of receiving a job offer. Search effort can be described by the amount of resources used for finding a job, which includes time but can also include the type of search channels. We present the basic models of economic job search theory and selected empirical findings, in which we focus on the job search behavior of unemployed individuals.

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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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On temporary layoffs and job search theory

Economics Letters ◽

10.1016/0165-1765(79)90036-3 ◽

1979 ◽

Vol 2 (3) ◽

pp. 281-285 ◽

Cited By ~ 2

Author(s):

Yannis M. Ioannides

Keyword(s):

Job Search ◽

Search Theory

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Uncertainty and the labour market: Recent developments in job-search theory

European Journal of Operational Research ◽

10.1016/0377-2217(86)90069-x ◽

1986 ◽

Vol 27 (2) ◽

pp. 252-253

Author(s):

P.C. Vassiliou

Keyword(s):

Labour Market ◽

Job Search ◽

Search Theory ◽

Recent Developments

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Education and inequality in employment in China and Japan in 2000s: a social network perspective

International Journal of Sociology and Social Policy ◽

10.1108/ijssp-01-2020-0009 ◽

2020 ◽

Vol ahead-of-print (ahead-of-print) ◽

Author(s):

Ka Yi Fung

Keyword(s):

Social Network ◽

Labour Market ◽

Job Search ◽

Network Effects ◽

Labour Markets ◽

Personal Contact ◽

Content Type ◽

Social Network Influence ◽

China And Japan ◽

Job Searching

PurposeThis paper attempts to discover whether or not social networks work in the same way in different sectors of the labour market in the same society, using data from the 2008 Asian Social Survey. Labour markets in some societies are segmented; there are two segments in the labour market, namely, the core sector and the peripheral sector. The practices of each sector differs from the others. Some sectors employ CME labour markets, while others favour LME labour markets (Kanbayashi and Takenoshita, 2014). In other words, we can find both CME and LME labour market in one society.Design/methodology/approachSince Granovetter’s (1973) pioneer study, scholars are interested in investigating in what way social network influence our job searching outcomes. However, these researchers have not yet yielded consistent results. Scholars argue that the institutional context of labour market can shape the network impacts on our job search outcome (Chen, 2014; Chua, 2011).FindingsSurprisingly, this paper finds that there is no room for the use of personal contact in the public sector in both China and Japan. But, mean status is positively related to annual income in the private companies sector in both Japan and China. The significant influences of mean status in the private sectors in both China and Japan reflect the reinforcing of existing social inequality structure. This is because as the status of contact can facilitate respondents' job attainment process, those who are already in higher social status are more likely than those who are in the bottom of the social strata, to get a better job with the help from their network members.Originality/valueThe above findings show us that social network can exert various impacts on people's job searching process even in the same society. This is because it is possible that the labour market are segmented. These segments have very different practices. This difference attributes to the inconsistent findings of network effects on occupational attainment process. Therefore, it is essential to locate which labour market respondents are in, and the features of this labour market. This can help us know more about the use and effectiveness of network in different types of labour markets.

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