Wages and the Value of Nonemployment*
<jats:title>Abstract</jats:title> <jats:p>Nonemployment is often posited as a worker’s outside option in wage-setting models such as bargaining and wage posting. The value of nonemployment is therefore a key determinant of wages. We measure the wage effect of changes...
| Main Authors: | , , , |
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| Format: | Article |
| Language: | English |
| Published: |
Oxford University Press (OUP)
2021
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| Online Access: | https://hdl.handle.net/1721.1/135362 |
| _version_ | 1826211216697065472 |
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| author | Jäger, Simon Schoefer, Benjamin Young, Samuel Zweimüller, Josef |
| author2 | Massachusetts Institute of Technology. Department of Economics |
| author_facet | Massachusetts Institute of Technology. Department of Economics Jäger, Simon Schoefer, Benjamin Young, Samuel Zweimüller, Josef |
| author_sort | Jäger, Simon |
| collection | MIT |
| description | <jats:title>Abstract</jats:title>
<jats:p>Nonemployment is often posited as a worker’s outside option in wage-setting models such as bargaining and wage posting. The value of nonemployment is therefore a key determinant of wages. We measure the wage effect of changes in the value of nonemployment among initially employed workers. Our quasi-experimental variation in the value of nonemployment arises from four large reforms of unemployment insurance (UI) benefit levels in Austria. We document that wages are insensitive to UI benefit changes: point estimates imply a wage response of less than $0.01 per $1.00 UI benefit increase, and we can reject sensitivities larger than $0.03. The insensitivity holds even among workers with low wages and high predicted unemployment duration, and among job switchers hired out of unemployment. The insensitivity of wages to the nonemployment value presents a puzzle to the widely used Nash bargaining model, which predicts a sensitivity of $0.24–$0.48. Our evidence supports wage-setting models that insulate wages from the value of nonemployment.</jats:p> |
| first_indexed | 2024-09-23T15:02:26Z |
| format | Article |
| id | mit-1721.1/135362 |
| institution | Massachusetts Institute of Technology |
| language | English |
| last_indexed | 2024-09-23T15:02:26Z |
| publishDate | 2021 |
| publisher | Oxford University Press (OUP) |
| record_format | dspace |
| spelling | mit-1721.1/1353622024-01-03T18:15:32Z Wages and the Value of Nonemployment* Jäger, Simon Schoefer, Benjamin Young, Samuel Zweimüller, Josef Massachusetts Institute of Technology. Department of Economics <jats:title>Abstract</jats:title> <jats:p>Nonemployment is often posited as a worker’s outside option in wage-setting models such as bargaining and wage posting. The value of nonemployment is therefore a key determinant of wages. We measure the wage effect of changes in the value of nonemployment among initially employed workers. Our quasi-experimental variation in the value of nonemployment arises from four large reforms of unemployment insurance (UI) benefit levels in Austria. We document that wages are insensitive to UI benefit changes: point estimates imply a wage response of less than $0.01 per $1.00 UI benefit increase, and we can reject sensitivities larger than $0.03. The insensitivity holds even among workers with low wages and high predicted unemployment duration, and among job switchers hired out of unemployment. The insensitivity of wages to the nonemployment value presents a puzzle to the widely used Nash bargaining model, which predicts a sensitivity of $0.24–$0.48. Our evidence supports wage-setting models that insulate wages from the value of nonemployment.</jats:p> 2021-10-27T20:23:08Z 2021-10-27T20:23:08Z 2020 2021-04-02T17:11:12Z Article http://purl.org/eprint/type/JournalArticle https://hdl.handle.net/1721.1/135362 en 10.1093/QJE/QJAA016 Quarterly Journal of Economics Creative Commons Attribution-Noncommercial-Share Alike http://creativecommons.org/licenses/by-nc-sa/4.0/ application/pdf Oxford University Press (OUP) MIT web domain |
| spellingShingle | Jäger, Simon Schoefer, Benjamin Young, Samuel Zweimüller, Josef Wages and the Value of Nonemployment* |
| title | Wages and the Value of Nonemployment* |
| title_full | Wages and the Value of Nonemployment* |
| title_fullStr | Wages and the Value of Nonemployment* |
| title_full_unstemmed | Wages and the Value of Nonemployment* |
| title_short | Wages and the Value of Nonemployment* |
| title_sort | wages and the value of nonemployment |
| url | https://hdl.handle.net/1721.1/135362 |
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