It was published in the scientific journal Economica, Vol. 77 (305), January 2010, pp. 46-59 (currently ranked "B" according to the FIISEG classification and with an impact factor of 0.708 according to the Journal of Citations Report) the article entitled "Unemployment Benefits and Reservation Wages: Key Elasticities from a Stripped-Down Job Search Approach", by Professor Mário Centeno, researcher at UECE and Visiting Assistant Professor at ISEG. The paper was co-authored with John T. Addison (Queen's University Belfast and University of South Carolina) and Pedro Portugal (Banco de Portugal and Universidade Nova de Lisboa).
The study deals with the reservation wage when in the presence of other variables affecting it. When looking for a new job, unemployed individuals determine the reservation wage, which corresponds to the lowest wage they are willing to accept in that job. A higher reservation wage decreases the probability of moving into employment. The reservation wage depends on the conditions of the unemployment benefit and the number of offers received. A more generous unemployment benefit and a higher job arrival rate increase the reservation wage. In this paper we estimate, for a broad set of EU countries, the elasticities of the reservation wage and the probability of re-employment to a measure of the generosity of the unemployment benefit and to the rate of job offer arrivals for the unemployed. The unemployed in Portugal respond very strongly to the disincentives of the unemployment benefit system, either by increasing their reservation wage or by decreasing the probability of re-employment.
