Do Firms Know What Workers Want?

Simon Cordes () and Max Müller

CRC TR 224 Discussion Paper Series from University of Bonn and University of Mannheim, Germany

Abstract: Labor supply depends on wages and amenities, and standard models implicitly assume that firms hold accurate beliefs about workers’ amenity valuations. In a survey with firms and workers in Germany, we measure workers’ valuations of amenities and firms’ beliefs about workers’ valuations. We find that firms systematically underestimate workers’ valuations of all amenities. These misperceptions are driven by interpersonal projection: managers project their own preferences—they value amenities less—onto workers. Through the lens of a simple model of imperfect competition, we show that firm misperceptions result in (i) labor shortages and (ii) excess labor costs for biased firms, and increase the market power of unbiased firms. Empirical tests confirm these predictions: a simple calibration suggests that non-providing firms could reduce their labor costs by 5% by providing amenities.

Keywords: Amenities; Behavioral Firms; Labor Shortages; Work from Home; Beliefs (search for similar items in EconPapers)
JEL-codes: D2 D83 J32 J42 J81 (search for similar items in EconPapers)
Pages: 127
Date: 2026-03
New Economics Papers: this item is included in nep-bec, nep-com, nep-hrm and nep-lma
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.crctr224.de/research/discussion-papers/archive/dp739 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bon:boncrc:crctr224_2025_739

Access Statistics for this paper

More papers in CRC TR 224 Discussion Paper Series from University of Bonn and University of Mannheim, Germany Kaiserstr. 1, 53113 Bonn , Germany.
Bibliographic data for series maintained by CRC Office ().