The effects of savings on reservation wages and search effort

• Theoretically, wealth has a positive (negative) effect on reservation wages (search).
• Empirically, wealth has a positive effect on reservation wages.
• Empirically, wealth has a negative effect on search effort of household heads.

This paper discusses the interrelations among wealth, reservation wages and search effort. A theoretical job search model predicts wealth to affect reservation wages positively, and search effort negatively. Subsequently, reduced form equations for reservation wages and search intensity take these theoretical results to the data. The data used is a Dutch panel, containing detailed information on individual wealth and income, subjective reservation wages and proxies for search effort. The main empirical results show that wealth has a significantly positive effect on reservation wages of both household heads and spouses, and a significantly negative effect on the search effort of household heads.