Impact of Reservation Wage on College Graduate Employment in China

• In Event: Roundtable Session 38
  In Roundtable Session: Wages and Economic Engagement Across International Contexts

Abstract

Chinese graduates face an increasing labor market competition after the tertiary education expansion in late 1990s. Given the rigid labor market demand, having a more realistic earnings expectation may lead to a more efficient job search. Using 2008 MYCOS College Graduate Employment Survey, this study empirically tests the role of reservation wage in shaping one’s postgraduate employment. A 100RMB reduction in reservation wage can significantly increase the probability of being employed upon graduation by 6.6% and the likelihood of being employed 6 months after graduation by 9.2%. Increasing the gap between reservation wage and market wage, on the contrary, has a significantly positive employment impact.

Author

• Po Yang, Peking University