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Title:The estimation of reservation wages: A simulation-based comparison PDF Logo
Authors:Leppin, Julian Sebastian
Issue Date:2012
Series/Report no.:HWWI research paper 124
Abstract:This paper examines the predictive power of different estimation approaches for reservation wages. It applies stochastic frontier models for employed workers and the approach from Kiefer and Neumann (1979b) for unemployed workers. Furthermore, the question of whether or not reservation wages decrease over the unemployment period is addressed. This is done by a pseudo-panel with known reservation wages which uses data from the German Socio-Economic Panel as a basis. The comparison of the estimators is carried out by a Monte Carlo simulation. The best results are achieved by the cross-sectional stochastic frontier model. The Kiefer-Neumann approach failed to predict the decreasing reservation wages correctly.
Subjects:job search theory
Monte Carlo simulation
reservation wages
stochastic wage frontiers
JEL:C21
C23
J64
Document Type:Working Paper
Appears in Collections:HWWI Research Papers, Hamburgisches WeltWirtschaftsInstitut

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