NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

On the Rationality of Black Youth Unemployment

Harry J. Holzer

NBER Working Paper No. 1411
Issued in August 1984
NBER Program(s):   LS

In this paper I provide some evidence on the question of whether the behavior of unemployed young blacks, whose reservation wages are relatively high and whose jobless spells are very lengthy, reflect rational maximizing choices. To do this, I use a simple income-maximizing job search model to imply employment probabilities and various elasticities which are compared to those which are actually observed for young blacks.The results show that, for reasonable discount rates, the employment probabilities implied by income-maximization are consistent with those observed for young blacks. The elasticities of reservation wages with respect to nonwage income that are implied by income-maximizing are also consistent with those estimated econometrically for this group. This was true despite the many assumptions embodied in this model whose validity fora sample of low-income youth is highly questionable.The evidence thus suggests that young blacks are making economically rational choices by choosing high reservation wages and lengthy spells without jobs.

download in pdf format
   (251 K)

download in djvu format
   (144 K)

email paper

This paper is available as PDF (251 K) or DjVu (144 K) (Download viewer) or via email.

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w1411

Published: Holzer, Harry J. "Are Unemployed Young Blacks Income-Maximizers?" Southern Economic Journal, Vol. 52, No. 1, pp. 777-784, January 1986.

Users who downloaded this paper also downloaded these:
Franz w0578 The Reservation Wage of Unemployed Persons in the Federal Republic of Germany: Theory and Empirical Tests
Levinsohn and Pugatch w17248 Prospective Analysis of a Wage Subsidy for Cape Town Youth
Clark and Summers w0274 The Dynamics of Youth Unemployment
 
Publications
Activities
Meetings
NBER Videos
Data
People
About

Support
National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us