The optimal monetary policy response to an increase in aggregate demand may be to reduce the interest rate. This apparently perverse response of interest rates can occur when the Phillips curve is non-linear.

Studies of the relative income hypothesis find positive and negative effects of relative income. To facilitate comparisons we use a large household panel and highlight the sensitivity of the relative income effect to the definition of the reference group and to the estimation strategy employed.

Our findings suggest the existence of a gender reservation wage gap. The presence of children, particularly pre-school age children, plays an important role in determining the proportion of this gap that can be explained by individual characteristics.

In this paper we present an econometric framework for modeling occupational choice that allows us to separately, and simultaneously, model supply-side and demand-side influences whilst allowing for potential ordering with regard to skill levels across occupations.

We model unemployment duration, reservation and expected wages simultaneously for individuals not in work, where wage expectations are identified via an exogenous policy shock. The policy shock increased expected wages, which were found to be positively associated with reservation wages.

We investigate the relationship between an individuals’ reservation wage and unemployment in the local area district. Largely unexplored in the literature this adds to the work which has examined the association between employee wages and unemployment—the ‘wage curve’.