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

Tor Eriksson and Nicolai Kristensen

No 5309, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: 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. 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 offers. In this paper this data predicament is solved by the use of the vignettes method to estimate individuals' willingness to pay for fringe benefits and job amenities. We find clear negative wage-fringe trade-offs, considerable heterogeneity in willingness to pay for fringe benefits, and signs of sorting. The findings imply that personnel economics models can be applied also to the analysis of nonmonetary rewards.

Keywords: sorting; heterogeneity; fringe benefits; nonmonetary rewards; trade-off (search for similar items in EconPapers)
JEL-codes: J32 J33 M52 (search for similar items in EconPapers)
Pages: 39 pages
Date: 2010-11
New Economics Papers: this item is included in nep-lab
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Published - published in: Journal of Labor Economics, 2014, 32 (4), 899-928

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Related works:
Journal Article: Wages or Fringes? Some Evidence on Trade-Offs and Sorting (2014)
Working Paper: Wages or Fringes? Some Evidence on Trade-offs and Sorting (2010)
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