The Empirics of the Reservation Wage and Labour Market Transitions

The first chapter of the thesis studies the determinants of the reservation wage of nonemployed workers using longitudinal survey data. We do not find enough evidence in favour of a decline in the reservation wage as the non-employment spells lengthens. However, the reservation wage of older workers and those with some savings are more responsive to non-employment duration. The second part of this chapter is dedicated to studying the search process of non-employed workers. It documents that the probability of sending an application, getting an interview, and getting hired declines with non-employment duration. Furthermore, workers who search through private employment agencies are more likely to get a job. The second chapter extends and builds on the previous chapter by examining job acceptance decisions in relation to the reservation wage. Our sample shows that 26% of hires from non-employment accept wages paying below their self-reported reservation wages. We attribute this finding to the fact that these jobs are temporary and are used as a steppingstone to the job these workers seek for the long-term. This argument is reinforced by the higher quit probability that this subset of workers is characterised by. The last chapter uses the PSID data to study competition of hiring effects on the starting wages of workers and on their wage-tenure profiles. This chapter documents three main findings: (a) Competition of hiring exits at both the non-employment and employment margins, (b) Starting wages are positively correlated with competition of hiring, (c) Hires from employment with multiple offers are characterised by flatter profiles. However, no explicit evidence has been detected in favour of competition induced wage-tenure profiles differentials for workers hired from non-employment.