Original scientific paper
https://doi.org/10.3935/rsp.v27i2.1670
Expectations Set High: Understanding Reservation Wages in North Macedonia
Marjan Petreski
orcid.org/0000-0002-2675-8325
; University American College Skopje, Skopje, North Macedonia
Ana María Oviedo
; The World Bank
Cesar Alfredo Cancho
; The World Bank
Abstract
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 who 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.
Keywords
reservation wage; market wage; determinants; North Macedonia
Hrčak ID:
242275
URI
Publication date:
27.7.2020.
Visits: 1.510 *