Reservation Wages and Labor Supply

Iris Kesternich, H. Schumacher, Bettina Siflinger, Franziska Valder

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Abstract

We test what survey measures of the reservation wage reveal about individual labor supply, i.e., an individual’s willingness to substitute leisure by consumption. To this end, we combine the reservation wage measure from a large labor market survey with the reservation wage for a one-hour job that we elicit in an online experiment. We find that these two measures are highly correlated. On average, the experimental reservation wage increases by 50 Cents for every Euro increase in the survey measure.
Original languageEnglish
Place of PublicationTilburg
PublisherCentER, Center for Economic Research
Number of pages9
Volume2018-054
Publication statusPublished - 19 Dec 2018

Publication series

NameCentER Discussion Paper
Volume2018-054

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Keywords

  • reservation wages
  • labor supply
  • search
  • validation of survey measures

Cite this

Kesternich, I., Schumacher, H., Siflinger, B., & Valder, F. (2018). Reservation Wages and Labor Supply. (CentER Discussion Paper; Vol. 2018-054). Tilburg: CentER, Center for Economic Research.