Reservation Wages and Unemployment

Last registered on February 21, 2025

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Pre-Trial

Trial Information

General Information

Title

Reservation Wages and Unemployment

RCT ID

AEARCTR-0015402

Initial registration date

February 19, 2025

Initial registration date is when the trial was registered.

It corresponds to when the registration was submitted to the Registry to be reviewed for publication.

First published

February 21, 2025, 6:45 AM EST

First published corresponds to when the trial was first made public on the Registry after being reviewed.

Locations

Country

Saudi Arabia

Region

Primary Investigator

Name

Faisal Kattan

Affiliation

University of Chicago

Contact Primary Investigator

Other Primary Investigator(s)

PI Name

John List

PI Affiliation

University of Chicago

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PI Name

Andrew Simon

PI Affiliation

University of Virginia

Contact Investigator

PI Name

Justin Holz

PI Affiliation

University of Michigan

Contact Investigator

Additional Trial Information

Status

In development

Start date

2025-02-23

End date

2025-05-31

Keywords

Labor

Additional Keywords

JEL code(s)

Secondary IDs

Prior work

This trial does not extend or rely on any prior RCTs.

Abstract

This study examines how reservation wages relate to job search behavior and employment outcomes. We elicit reservation wages from low-income job seekers and randomly assign job offers based on labor market conditions, education level, and geographic location. The study tracks job application rates and employment status over time.

External Link(s)

Registration Citation

Citation

Holz, Justin et al. 2025. "Reservation Wages and Unemployment." AEA RCT Registry. February 21. https://doi.org/10.1257/rct.15402-1.0

Sponsors & Partners

Experimental Details

Interventions

Intervention(s)

This study examines how reservation wages influence job search behavior among low-income job seekers. Participants will state their minimum acceptable wage and provide job preferences. They will be randomly assigned job offers based on labor market conditions, education level, and geographic location.

Intervention (Hidden)

The experiment uses reservation wage elicitation to examine how job seekers respond to job offers relative to their stated reservation wage. Participants will first answer questions about their work preferences and availability to help guide the job search process. Then, they will state the minimum wage they are willing to accept for a full-time job. They will be randomly assigned wage offers based on labor market conditions, their level of education, and geographical location. The list of jobs they are assigned from will be derived from a government-compiled job registry that reflects the most recent wage distribution data.

Based on the randomly drawn wage offer (Y) and their stated reservation wage (X), participants will fall into two groups:
1. If Y ≥ X: Participants will be informed that there are job opportunities matching their stated wage. They will be contacted with job details and supported in the application process.
2. If Y < X: Participants will be informed that no jobs match their stated wage, but they will receive a list of alternative opportunities that closely align with their profile. They may choose to apply at their discretion, with no penalties for declining.

We will track job application and employment behavior for six months after initial participation to analyze labor market engagement. This study will provide insights into whether individuals accept job offers at or above their reservation wage and how those with higher reservation wages engage with alternative job opportunities.

Intervention Start Date

2025-02-23

Intervention End Date

2025-05-31

Primary Outcomes

Primary Outcomes (end points)

1. Job Application Rate – Whether individuals apply to at least one job after receiving a recommended job match.
2. Employment Status – Whether individuals are employed six months after participation.
3. Wages – Reported wages for individuals who gain employment.

Primary Outcomes (explanation)

Secondary Outcomes

Secondary Outcomes (end points)

Secondary Outcomes (explanation)

Experimental Design

This study examines the relationship between reservation wages and job search behavior among low-income unemployed individuals. Participants will state their minimum acceptable wage and job preferences. They will be randomly assigned a job offer based on a randomly drawn wage reflecting labor market conditions. The study will track job application rates and employment status six months after participation.

Experimental Design Details

The experiment follows a structured reservation wage elicitation and randomized job offer assignment process. Participants are drawn from a low-income unemployed population and first provide their stated reservation wage alongside information on work preferences, commuting willingness, remote work flexibility, and job sector preferences.

A random wage offer (Y) is drawn from a government-compiled job registry that reflects wage distributions based on education, experience, and regional labor markets. Participants fall into two groups:
1. If Y ≥ X (reservation wage): Participants are informed that job opportunities exist at their preferred wage level, and they receive job details along with application support.
2. If Y < X (reservation wage): Participants are informed that no jobs meet their stated wage but are provided with alternative opportunities that match their profile, with the option to apply at their discretion.

We will track job application and employment behavior for six months after initial participation to assess whether individuals apply for and accept job offers. The study will provide insights into how reservation wages influence labor market engagement over time.

Randomization Method

Randomization into treatment is done in office by computer.

Randomization Unit

Individual

Was the treatment clustered?

Experiment Characteristics

Sample size: planned number of clusters

2500 individuals

Sample size: planned number of observations

2500 individuals

Sample size (or number of clusters) by treatment arms

The study will enroll 2,500 low-income unemployed individuals registered in the government job-seeker database. Participants will be randomly assigned to one of two groups based on a randomly drawn wage:
- Group 1 (Y ≥ X, Job Offer Above Reservation Wage): We expect approximately 50% of participants to receive job offers that meet or exceed their reservation wage.
- Group 2 (Y < X, No Job Offer at Reservation Wage): We expect approximately 50% of participants to not receive a job offer matching their stated wage but to be presented with alternative opportunities.

This distribution ensures equal representation across treatment conditions to analyze the effects of reservation wages on job search behavior, job application rates, and employment outcomes over six months.

Minimum detectable effect size for main outcomes (accounting for sample design and clustering)

Supporting Documents and Materials

IRB