Scandinavian Working Papers in Economics

Working Paper Series,
Uppsala University, Department of Economics

No 2010:26: The Determinants and Consequences of Unemployed Workers’ Wage Demands

Stefan Eriksson () and Jonas Lagerström ()
Additional contact information
Stefan Eriksson: Department of Economics, Postal: Uppsala University, P.O. Box 513, SE-751 20 Uppsala, Sweden
Jonas Lagerström: Åbo Akademi University, Postal: Department of Economics, FI-20500 Åbo, Finland

Abstract: This paper studies the determinants and labor market consequences of unemployed workers’ wage demands using direct data on the workers’ actual wage requests. Our results show that most workers want a wage close to what they earned in their previous jobs, and thus much more than they get in unemployment benefits. However, our results also show that some groups, such as women, tend to systematically demand lower wages. Also, we find that workers with high wage demands are contacted by firms less often than otherwise similar workers with lower wage demands. Thus our results indicate that too high wage demands may contribute to high unemployment.

Keywords: Unemployment; Job Search; Wage Demands; Gender Differences

JEL-codes: J31; J64

34 pages, November 22, 2010

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