The effect of unemployment duration on reservation wages: Evidence from Belgium

Deschacht, Nick; Vansteenkiste, Sarah

doi:10.1016/j.labeco.2021.102010

Cited by 3 publications

(3 citation statements)

References 36 publications

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“…18.1 years), it would be very hard to argue that the average politician is 'in it for the money '. 11 As discussed above, this net present value loss may reflect that political experience yields specialized human capital gains with limited labour market returns for most politicians (De Vita et al, 2011;Williamson, 1983), that the disruption of individuals' professional career is penalized in terms of earnings potential (Becker, 1964;Deschacht & Vansteenkiste, 2021;Mincer, 1974;Mortensen, 1986;Speiser, 2021) or that reputational costs are associated with (particularly involuntary) exits from politics. We return to-and offer some evidence in corroboration of-some of these arguments below.…”

Section: Main Findingsmentioning

confidence: 99%

“…Even so, individuals' job‐specific human capital is likely to depreciate while holding a political office, particularly among occupation and education groups that do not rely on the skills, knowledge and expertise required in politics (see above). A political career thus may make it more challenging for such individuals to secure high‐paying employment upon leaving office (Byrne & Theakston, 2016), and they may be forced to drop their reservation wage to increase the likelihood of finding a job (Deschacht & Vansteenkiste, 2021; Mortensen, 1986).…”

Section: Previous Literature and Theoretical Expectationsmentioning

confidence: 99%

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A post‐politics earnings penalty? Evidence from politicians' lifetime income trajectories (1970–2019)

Geys,

Sørensen

2023

Kyklos

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Politicians are commonly believed to gain financially from holding and/or having held office. We argue that there may often also be economic downsides to pursuing a political career and investigate whether and when politicians can (not) capitalize on their political experience. We thereby study both entry into and exit from political office and directly compare the returns to politics across government levels and types of politicians. Empirically, we build on detailed information from Norwegian administrative register data over the period 1970–2019 to study individual‐level income developments before, during and after a political career at the national and local levels (covering nearly 22,000 individuals and 700,000 person‐years). Using an event‐study methodology, we show that politicians on average witness a significant income boost during their time in office. In sharp contrast, leaving political office is on average associated with a substantial drop in income, which generally outweighs the income gain from entry into office. These findings suggest that most politicians face a net present value loss from holding office.

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Section: Main Findingsmentioning

confidence: 99%

Section: Previous Literature and Theoretical Expectationsmentioning

confidence: 99%

A post‐politics earnings penalty? Evidence from politicians' lifetime income trajectories (1970–2019)

Geys,

Sørensen

2023

Kyklos

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“…IV. However, the strong negative correlation (-.788) between ‗DIFFdifference between wage offer and reservation price' but a positive relationship between ‗DUR -duration of unemployment' and ‗reservation wage' clearly states that as duration of unemployment becomes lengthier, actual wage offer tends to decline graduates in Bangladesh facing a longer duration of unemployment must revitalize their job search strategy in terms of reservation in order to accept the reality of current job market situation or else their employability might be negatively deemed (Nakata and Chowdhury, 2019;Brown andTaylor, 2008, 2009;2013;Deschacht, 2021;Koenig, Manning and Petrongolo 2017) V.…”

Section: IIImentioning

confidence: 99%

Reservation Wage for High Skilled Graduates in Bangladesh: Preliminary Factors

Chowdhury¹,

Islam²

2022

IBR

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This paper preliminarily discusses about the determinants of reservation wage for graduates in Bangladesh. The researchers discussed several models in order to identify the common factors which determine the reservation wage of the tertiary graduates in Bangladesh. All these models are multiple linear regression models. Data was collected on both employed and unemployed individuals across the country who graduated from different private and public universities. Initially the researchers investigated the following factors: socio-economic status (Parental income), selection of occupation, duration of unemployment, difference between actual and reservation wage, managerial level of job, sources of different media of job applications (both formal and informal) and in the revised phase of the model the researchers discovered that that inclusion of ‘previous working experience’ made a significant difference in the relationship among dependent and independent variables. One noticeable difference in the findings of the current researchers compared to those who worked on the same topic earlier was: positive relationship between duration of unemployment and reservation price of the graduates. The researchers further explored reasons of this above result theoretically. Finally, the researchers accepted the following variables (rejected as null hypothesis) as significant factors (Socio-economic background, difference between actual salary and reservation price, managerial level of job, media of job applications in terms of formal or informal, previous working experience) to influence the graduate reservation wage in Bangladesh (in the alternatives). Additionally, the researchers also explained why’ duration of unemployment’ was not selected as a crucial determinant in the current paper. Finally the researchers prescribed some positive solutions on how firms in Bangladesh could deal with the increasing demand of wage premiums from high skilled graduates and what the possible consequences are if they failed to do so.      

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Social policy and labor supply: the impact of activating labor market institutions on reservation wages

Fuchs

Prechsl

Wolbring

2022

Socio-Economic Review

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Activation is an efficacious policy paradigm in modern welfare states. Taking the case of Germany, we study the relationship between the embeddedness of benefit recipients in activating labor market institutions and individual labor supply. Using panel data, we estimate the effects of transitions between key institutional states with different degrees of activation on reservation wages (RWs). We show that RWs react to activation: the transition from gainful employment to unemployment benefit receipt leads to an average decrease of 3.1% in RWs. The transition from gainful employment to welfare benefit receipt—an institutional state with far more rigorous activation—leads to a stronger decrease of 4.9%. Mediation analyses show that the income associated with different institutional states is the predominant mechanism that drives the effect on RWs. However, subjective social status also partly mediates the effect. Implications of these findings for active labor market policies are discussed.

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The effect of unemployment duration on reservation wages: Evidence from Belgium

Cited by 3 publications

References 36 publications

A post‐politics earnings penalty? Evidence from politicians' lifetime income trajectories (1970–2019)

A post‐politics earnings penalty? Evidence from politicians' lifetime income trajectories (1970–2019)

Reservation Wage for High Skilled Graduates in Bangladesh: Preliminary Factors

Social policy and labor supply: the impact of activating labor market institutions on reservation wages

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