Self-reported reservation wages in high-unemployment contexts

Type Working Paper - REDI3x3 Working paper 37
Title Self-reported reservation wages in high-unemployment contexts
Publication (Day/Month/Year) 2017
URL, Piraino & Zoch 2017 REDI3x3 Working Paper 37 How​reliable are reservation wages_0.pdf
We show that responses to a traditional, open-ended reservation-wage question are susceptible to a high degree of overestimation and response noise when individuals are rarely confronted with actual wage offers. We argue that, for individuals with weak labor market attachment, a sequence of increasing hypothetical wage offers can more reliably elicit individual preferences: it contains more information about future decisions; it is less sensitive to irrelevant priming effects and more responsive to the economic circumstances of respondents. This has implications for a variety of empirical models in labour economics.

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