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.

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’.