Individual wealth, reservation wages, and transitions into employment

H.G. Bloemen, E.G.F. Stancanelli

Research output: Contribution to JournalArticleAcademic

Abstract

We investigate the relationship between financial wealth, reservation wages, and labor market transitions. Wealth is assumed to affect the level of the reservation wage and the employment probability. We test for the validity of this assumption by estimating a simultaneous-equations model of reservation wages, labor market transitions, and wealth. The data used for the analysis relate to a sample of unemployed job searchers. We use subjective information on the reservation wage. Wealth is found to have a significantly positive impact on the reservation wage. The overall impact of wealth on the employment probability is negative though small.
Original languageEnglish
Pages (from-to)400-439
Number of pages40
JournalJournal of Labor Economics
Volume19
Issue number2
DOIs
Publication statusPublished - 2001

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