Declining Reservation Wages and Learning.
Empirical studies of job search strongly suggest that the reservati on wage of unemployed job-seeking individuals declines with the length o f their respective unemployment spells. The authors provide a new explanation for this, ba sed on the reasonable assumption that worker s do not have precise knowledge of the distribution of the prevailing wages. An individual model of jobs earch and learning is formulated. It is shown that the declining trend of reservation wages naturally arises due to the selection process, when search costs are not too sm all. The example of a normal wage offer distribution is analyzed and the implications are discussed. Copyright 1988 by The Review of Economic Studies Limited.
Year of publication: |
1988
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Authors: | Burdett, Kenneth ; Vishwanath, Tara |
Published in: |
Review of Economic Studies. - Wiley Blackwell, ISSN 0034-6527. - Vol. 55.1988, 4, p. 655-65
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Publisher: |
Wiley Blackwell |
Saved in:
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