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

Tor Eriksson () and Nicolai Kristensen ()

No 10-16, Working Papers from University of Aarhus, Aarhus School of Business, Department of Economics

Abstract: The two key predictions of hedonic wage theory are that there is a trade-o¤ between wages and nonmonetary rewards and that the latter can be used as a sorting device by …rms to attract and retain the kind of employees they desire. Empirical analysis of these topics are scarce as they require detailed data on all monetary as well as nonmonetary rewards, not only for the job chosen but also for alternative o¤ers. In this paper this data predicament is solved by the use of the vignettes method to estimate individuals’ willingness to pay for fringe bene…ts and job amenities. We …nd clear negative wage-fringe trade-o¤s, con- siderable heterogeneity in willingness to pay for fringe bene…ts, and signs of sorting. The …ndings imply that personnel economics models can be applied also to the analysis of nonmonetary rewards.

Keywords: Fringe benefits; Nonmonetary rewards; Trade-off; Sorting; Heterogeneity (search for similar items in EconPapers)
JEL-codes: J32 J33 M52 (search for similar items in EconPapers)
Pages: 43 pages
Date: 2010-11-01
New Economics Papers: this item is included in nep-lab
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Journal Article: Wages or Fringes? Some Evidence on Trade-Offs and Sorting (2014) Downloads
Working Paper: Wages or Fringes? Some Evidence on Trade-offs and Sorting (2010) Downloads
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