IDEAS home Printed from https://ideas.repec.org/a/ucp/jlabec/doi10.1086-676662.html
   My bibliography  Save this article

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

Author

Listed:
  • Tor Eriksson
  • Nicolai Kristensen

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. 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.

Suggested Citation

  • Tor Eriksson & Nicolai Kristensen, 2014. "Wages or Fringes? Some Evidence on Trade-Offs and Sorting," Journal of Labor Economics, University of Chicago Press, vol. 32(4), pages 899-928.
    • Handle: RePEc:ucp:jlabec:doi:10.1086/676662
    DOI: 10.1086/676662
    as

    Download full text from publisher

    File URL: http://dx.doi.org/10.1086/676662
    Download Restriction: Access to the online full text or PDF requires a subscription.
    File URL: http://dx.doi.org/10.1086/676662
    Download Restriction: Access to the online full text or PDF requires a subscription.
    File URL: https://libkey.io/10.1086/676662?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. James Heckman & Flavio Cunha, 2007. "The Technology of Skill Formation," American Economic Review, American Economic Association, vol. 97(2), pages 31-47, May.
    2. Steven G. Allen, 1981. "Compensation, Safety, and Absenteeism: Evidence from the Paper Industry," ILR Review, Cornell University, ILR School, vol. 34(2), pages 207-218, January.
    3. Daniel S. Hamermesh, 1999. "Changing Inequality in Markets for Workplace Amenities," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 114(4), pages 1085-1123.
    4. Nicholas Bloom & James Liang & John Roberts & Zhichun Jenny Ying, 2015. "Does Working from Home Work? Evidence from a Chinese Experiment," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 130(1), pages 165-218.
    5. Oyer, Paul & Schaefer, Scott, 2005. "Why do some firms give stock options to all employees?: An empirical examination of alternative theories," Journal of Financial Economics, Elsevier, vol. 76(1), pages 99-133, April.
    6. Edward P. Lazear & Kathryn L. Shaw, 2007. "Personnel Economics: The Economist's View of Human Resources," Journal of Economic Perspectives, American Economic Association, vol. 21(4), pages 91-114, Fall.
    7. Laffont, Jean-Jacques & Tirole, Jean, 1986. "Using Cost Observation to Regulate Firms," Journal of Political Economy, University of Chicago Press, vol. 94(3), pages 614-641, June.
    8. Flavio Cunha & James J. Heckman & Susanne M. Schennach, 2010. "Estimating the Technology of Cognitive and Noncognitive Skill Formation," Econometrica, Econometric Society, vol. 78(3), pages 883-931, May.
    9. Tor Eriksson, 2012. "Progression of HR Practices in Danish Firms During Two Decades," Advances in the Economic Analysis of Participatory & Labor-Managed Firms, in: Advances in the Economic Analysis of Participatory and Labor-Managed Firms, pages 237-266, Emerald Group Publishing Limited.
    10. Wiktor Adamowicz & Peter Boxall & Michael Williams & Jordan Louviere, 1998. "Stated Preference Approaches for Measuring Passive Use Values: Choice Experiments and Contingent Valuation," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 80(1), pages 64-75.
    11. Train,Kenneth E., 2009. "Discrete Choice Methods with Simulation," Cambridge Books, Cambridge University Press, number 9780521766555, January.
    12. Daniel Kahneman & Amos Tversky, 2013. "Prospect Theory: An Analysis of Decision Under Risk," World Scientific Book Chapters, in: Leonard C MacLean & William T Ziemba (ed.), HANDBOOK OF THE FUNDAMENTALS OF FINANCIAL DECISION MAKING Part I, chapter 6, pages 99-127, World Scientific Publishing Co. Pte. Ltd..
    13. David Revelt & Kenneth Train, 1998. "Mixed Logit With Repeated Choices: Households' Choices Of Appliance Efficiency Level," The Review of Economics and Statistics, MIT Press, vol. 80(4), pages 647-657, November.
    14. Rosen, Sherwin, 1974. "Hedonic Prices and Implicit Markets: Product Differentiation in Pure Competition," Journal of Political Economy, University of Chicago Press, vol. 82(1), pages 34-55, Jan.-Feb..
    15. Scott Stern, 2004. "Do Scientists Pay to Be Scientists?," Management Science, INFORMS, vol. 50(6), pages 835-853, June.
    16. Charles Brown, 1980. "Equalizing Differences in the Labor Market," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 94(1), pages 113-134.
    17. Brooks Pierce, 2001. "Compensation Inequality," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 116(4), pages 1493-1525.
    18. Rachel Croson & Uri Gneezy, 2009. "Gender Differences in Preferences," Journal of Economic Literature, American Economic Association, vol. 47(2), pages 448-474, June.
    19. Nabanita Datta Gupta & Leslie Stratton, 2010. "Examining the impact of alternative power measures on individual time use in American and Danish couple households," Review of Economics of the Household, Springer, vol. 8(3), pages 325-343, September.
    20. Joanne Salop & Steven C. Salop, 1976. "Self-selection and turnover in the labor market," Special Studies Papers 80, Board of Governors of the Federal Reserve System (U.S.).
    21. John A. List, 2001. "Do Explicit Warnings Eliminate the Hypothetical Bias in Elicitation Procedures? Evidence from Field Auctions for Sportscards," American Economic Review, American Economic Association, vol. 91(5), pages 1498-1507, December.
    22. Duncan, Greg J & Holmlund, Bertil, 1983. "Was Adam Smith Right after All? Another Test of the Theory of Compensating Wage Differentials," Journal of Labor Economics, University of Chicago Press, vol. 1(4), pages 366-379, October.
    23. Paul Oyer, 2008. "Salary or benefits?," Research in Labor Economics, in: Work, Earnings and Other Aspects of the Employment Relation, pages 429-467, Emerald Group Publishing Limited.
    24. Timothy J. Gronberg & W. Robert Reed, 1994. "Estimating Workers' Marginal Willingness to Pay for Job Attributes Using Duration Data," Journal of Human Resources, University of Wisconsin Press, vol. 29(3), pages 911-931.
    25. Keith A. Bender & Susan M. Donohue & John S. Heywood, 2005. "Job satisfaction and gender segregation," Oxford Economic Papers, Oxford University Press, vol. 57(3), pages 479-496, July.
    26. Green, Paul E & Srinivasan, V, 1978. "Conjoint Analysis in Consumer Research: Issues and Outlook," Journal of Consumer Research, Journal of Consumer Research Inc., vol. 5(2), pages 103-123, Se.
    27. Ben-Akiva, M. & Bolduc, D. & Bradley, M., 1993. "Estimation of Travel Choice Models with Randomly Distributed Values of Time," Papers 9303, Laval - Recherche en Energie.
    28. Robert B. Barsky & F. Thomas Juster & Miles S. Kimball & Matthew D. Shapiro, 1997. "Preference Parameters and Behavioral Heterogeneity: An Experimental Approach in the Health and Retirement Study," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 112(2), pages 537-579.
    29. Alon Klement, 2004. "Incentive Structures for Class Action Lawyers," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 20(1), pages 102-124, April.
    30. van Beek, Krijn W. H. & Koopmans, Carl C. & van Praag, Bernard M. S., 1997. "Shopping at the labour market: A real tale of fiction," European Economic Review, Elsevier, vol. 41(2), pages 295-317, February.
    31. Joanne Salop & Steven Salop, 1976. "Self-Selection and Turnover in the Labor Market," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 90(4), pages 619-627.
    32. L. F. Dunn, 1979. "Measurement of Internal Income-Leisure Tradeoffs," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 93(3), pages 373-393.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Nicole Maestas & Kathleen J. Mullen & David Powell & Till von Wachter & Jeffrey B. Wenger, 2023. "The Value of Working Conditions in the United States and the Implications for the Structure of Wages," American Economic Review, American Economic Association, vol. 113(7), pages 2007-2047, July.
    2. Edward P. Lazear, 1995. "Personnel Economics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262121883, December.
    3. Edward P. Lazear & Paul Oyer, 2012. "Personnel Economics [The Handbook of Organizational Economics]," Introductory Chapters,, Princeton University Press.
    4. Haghani, Milad & Bliemer, Michiel C.J. & Hensher, David A., 2021. "The landscape of econometric discrete choice modelling research," Journal of choice modelling, Elsevier, vol. 40(C).
    5. Lex Borghans & Angela Lee Duckworth & James J. Heckman & Bas ter Weel, 2008. "The Economics and Psychology of Personality Traits," Journal of Human Resources, University of Wisconsin Press, vol. 43(4).
    6. Minhaj Mahmud & Italo A Gutierrez & Krishna B Kumar & Shanthi Nataraj, 2021. "What Aspects of Formality Do Workers Value? Evidence from a Choice Experiment in Bangladesh," The World Bank Economic Review, World Bank, vol. 35(2), pages 303-327.
    7. Paul Oyer, 2008. "Salary or benefits?," Research in Labor Economics, in: Work, Earnings and Other Aspects of the Employment Relation, pages 429-467, Emerald Group Publishing Limited.
    8. StÈphane Bonhomme & GrÈgory Jolivet, 2009. "The pervasive absence of compensating differentials," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 24(5), pages 763-795.
    9. Jason Sockin, 2022. "Show Me the Amenity: Are Higher-Paying Firms Better All Around?," CESifo Working Paper Series 9842, CESifo.
    10. Bruno Lanz & Allan Provins, 2015. "Using discrete choice experiments to regulate the provision of water services: do status quo choices reflect preferences?," Journal of Regulatory Economics, Springer, vol. 47(3), pages 300-324, June.
    11. Edward P. Lazear & Kathryn L. Shaw, 2007. "Personnel Economics: The Economist's View of Human Resources," Journal of Economic Perspectives, American Economic Association, vol. 21(4), pages 91-114, Fall.
    12. Ladenburg, Jacob & Olsen, Søren Bøye, 2014. "Augmenting short Cheap Talk scripts with a repeated Opt-Out Reminder in Choice Experiment surveys," Resource and Energy Economics, Elsevier, vol. 37(C), pages 39-63.
    13. Bruno Lanz & Allan Provins, 2012. "Do status quo choices reflect preferences? Evidence from a discrete choice experiment in the context of water utilities' investment planning," CEPE Working paper series 12-87, CEPE Center for Energy Policy and Economics, ETH Zurich.
    14. Alexandre Mas & Amanda Pallais, 2017. "Valuing Alternative Work Arrangements," American Economic Review, American Economic Association, vol. 107(12), pages 3722-3759, December.
    15. Ernesto Villanueva, 2004. "Compensating wage differentials and voluntary job changes: Evidence from West Germany," Economics Working Papers 738, Department of Economics and Business, Universitat Pompeu Fabra.
    16. Ida, Takanori & Goto, Rei, 2009. "Interdependency among addictive behaviours and time/risk preferences: Discrete choice model analysis of smoking, drinking, and gambling," Journal of Economic Psychology, Elsevier, vol. 30(4), pages 608-621, August.
    17. Konstantinos Pouliakas & Ioannis Theodossiou, 2010. "Measuring the Utility Cost of Temporary Employment Contracts Before Adaptation: A Conjoint Analysis Approach," Economica, London School of Economics and Political Science, vol. 77(308), pages 688-709, October.
    18. Bruno Lanz & Allan Provins, 2013. "Valuing Local Environmental Amenity with Discrete Choice Experiments: Spatial Scope Sensitivity and Heterogeneous Marginal Utility of Income," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 56(1), pages 105-130, September.
    19. Scott Stern, 2004. "Do Scientists Pay to Be Scientists?," Management Science, INFORMS, vol. 50(6), pages 835-853, June.
    20. Ann Bartel & Brianna Cardiff-Hicks & Kathryn Shaw, 2013. "Compensation Matters: Incentives for Multitasking in a Law Firm," NBER Working Papers 19412, National Bureau of Economic Research, Inc.

    More about this item

    JEL classification:

    • J32 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Nonwage Labor Costs and Benefits; Retirement Plans; Private Pensions
    • J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods
    • M52 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Compensation and Compensation Methods and Their Effects

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ucp:jlabec:doi:10.1086/676662. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Journals Division (email available below). General contact details of provider: https://www.journals.uchicago.edu/JOLE .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.