Great expectations: Reservation wages and minimum wage reform

This paper is the first causal study using quasi-experimental methods to identify effect of minimum wages on reservation non-workers. We exploit variation in regional exposure introduction a high-impact wage Germany 2015, combined with survey responses about acceptance thresholds job seekers. Results show 16% increase among non-employed seekers at low end distribution during period immediately following reform. Over time, however, expectations revert pre-reform levels. Our findings are suggestive learning search process and further imply that do not necessarily result higher short-run labor force participation, as adjust their accordingly.