Wages or Fringes? Some Evidence on Trade-Offs and Sorting

The two key predictions of hedonic wage theory are that there is a trade-off between wages and nonmonetary rewards and that the latter can be used as a sorting device by firms to attract and retain the kind of employees they desire. We use the vignettes method to estimate individuals’ willingness-to...

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Bibliographic Details
Published in:Journal of labor economics 2014-10, Vol.32 (4), p.899-928
Main Authors: Eriksson, Tor, Kristensen, Nicolai
Format: Article
Language:English
Subjects:
Economic benefits
Economic theory
Empirical evidence
Employee benefits
Employee compensation
Employees
Estimating techniques
Fringe benefits
Health insurance
Internet
Job training
Parametric models
Studies
Trade-off
Tradeoff analysis
Wage theory
Wages
Wages & salaries
Willingness to pay
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Summary:The two key predictions of hedonic wage theory are that there is a trade-off between wages and nonmonetary rewards and that the latter can be used as a sorting device by firms to attract and retain the kind of employees they desire. We use the vignettes method to estimate individuals’ willingness-to-pay for fringe benefits and job amenities. We find negative wage-fringe trade-offs, considerable heterogeneity in willingness-to-pay for fringe benefits, and signs of sorting.
ISSN:0734-306X
1537-5307
DOI:10.1086/676662