Inferring the Adequacy of Wage Expectations Among the Non-Working

Paweł Strzelecki and Joanna Tyrowicz

Gospodarka Narodowa. The Polish Journal of Economics, 2015, issue 6, 51-69

Abstract: Reservation wages and expected wages constitute different categories, both conceptually and empirically. The aim of this article is the construction of a method for inferring the adequacy of both kinds of wage expectations among persons who are not employed. This method is used to verify the hypothesis about the adequacy of reservation wages and expected wages among the unemployed in Poland. The key element of the analysis in this study is to what extent the reservation wages and wage expectations of the unemployed are in alignment with market conditions. We exploit a unique source of data on expected wages (National Bank of Poland survey) as well as data on reservation wages (Labour Force Survey) and develop a series of parametric and non-parametric counterfactual distributions for the registered unemployed. Our results indicate that expected wages are higher than reservation wages and continue to be positively correlated with wage pressure. We find that reservation wages in Poland from 2011 to 2014 were not excessive. This is important because if the wage expectations of the unemployed are in excess of market evaluation, unemployment and wage pressures prevail.

Keywords: Mincerian wage regression; counterfactual distribution; reservation wage; wage expectations; wage pressure; LFS (search for similar items in EconPapers)
JEL-codes: J31 J64 (search for similar items in EconPapers)
Date: 2015
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Persistent link: https://EconPapers.repec.org/RePEc:sgh:gosnar:y:2015:i:6:p:51-69

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