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Unemployment Benefits and Reservation Wages: Key Elasticities from a Stripped-Down Job Search Approach
John T. Addison
J64 - Unemployment: Models, Duration, Incidence, and Job Search
J65 - Unemployment Insurance; Severance Pay; Plant Closings
This paper exploits survey information on reservation wages and data on actual wages from the European Community Household Panel to deduce in the manner of Lancaster and Chesher (1983) additional parameters of a stylized structural search model; specifically, reservation wage and transition/duration elasticities. The informational requirements of this approach are minimal, thereby facilitating comparisons between countries. Further, its policy content is immediate insofar as the impact of unemployment benefit rules and measures increasing the arrival rate of job offers are concerned. These key elasticities are computed for the United Kingdom and eleven other European nations.