Expectations Set High : Understanding Reservation Wages in North Macedonia
The objectives of this study are to understand the determinants of reservation wages and measure the gap between reservation and market wages in North Macedonia. The study makes use of recently collected information on reservation wages in the Labo...
| Main Authors: | , , |
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| Format: | Working Paper |
| Language: | English |
| Published: |
World Bank, Washington, DC
2019
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/324971569414813421/Expectations-Set-High-Understanding-Reservation-Wages-in-North-Macedonia http://hdl.handle.net/10986/32452 |
| Summary: | The objectives of this study are to
understand the determinants of reservation wages and measure
the gap between reservation and market wages in North
Macedonia. The study makes use of recently collected
information on reservation wages in the Labor Force Survey
2016 and 2017. The analysis relies on ordinary least
squares, propensity score matching, Heckman-corrected
estimates, and panel fixed effects. The results suggest that
it is mainly supply factors that shape reservation wages in
the country. Higher education achievement sizably increases
future wage expectations, while age and longer spells of
unemployment reduce them. Demand factors are found to be
insignificant for reservation wage formation. Observed by
skill level, the results suggest that low-skilled
individuals consistently value their skills higher than what
the market offers and set too high expectations. These
circumstances are aggravated in cases where the household is
well-off and/or receives remittances. By contrast, highly
skilled individuals, despite maintaining a positive
reservation wage gap, have a propensity to accept market
wages even when they fall below their reservation wage,
likely because these workers fear rapid depreciation of
their skills. |
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