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Reservation Wages and the Unemployment of Older Workers

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Abstract

Our purpose is to examine the level of reservation wages among older unemployed (45+), and investigate what happens to the level of reservation wages as the length of unemployment increases. Using data from questionnaires completed by unemployed, we examined the reservation wages of 364 individuals and asked whether they would be willing to compromise in terms of their occupation, profession or geographic location to find a job. 112 of the participants responded to two questionnaires over a three-month period to determine the changes in their expectations over time. Additionally, we conducted qualitative interviews with 10 unemployed. We found that older people experienced longer periods of unemployment, and had a greater willingness to reduce salary expectations. The study establishes an innovative connection between older unemployed, reservation wages and the duration of unemployment, showing that higher reservation wages among older unemployed is the cause of prolonging their unemployment.

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Notes

  1. The decision to use the age of 45 is consistent with several previous studies and institutions: the National Bureau of Statistics of Australia, Bangali, 2004, Axelrad et al., 2016 and more.

  2. Although Hausman test (Nakamura and Nakamura 1981) to the entire sample revealed that the variable duration of unemployment was endogenous in the first regression, any optional IV was week (Murray, 2006) , and therefore Hasuman test was not valid and the OLS estimates would be more consistent (Stock and Yogo, 2002).

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Authors and Affiliations

  1. Center on Aging & Work, Boston College, 140 Commonwealth Avenue, Chestnut Hill, MA, 02467, USA

    Hila Axelrad

  2. Department of Management, The western Galilee College, Akko, Israel

    Israel Luski

  3. Department of Public Policy & Administration, Guilford Glazer Faculty of Business & Management, Ben-Gurion University of the Negev, Beer Sheva, Israel

    Miki Malul

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  1. Hila Axelrad
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  2. Israel Luski
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  3. Miki Malul
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Correspondence to Hila Axelrad.

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Axelrad, H., Luski, I. & Malul, M. Reservation Wages and the Unemployment of Older Workers. J Labor Res 38, 206–227 (2017). https://doi.org/10.1007/s12122-017-9247-6

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