Employer-provided benefits are a large and growing share of compensation costs. In this paper, I consider three factors that can affect the value created by employer-sponsored benefits. First, firms have a comparative advantage (for example, due to scale economies or tax treatment) in purchasing relative to employees. This advantage can vary across firms based on size and other differences in cost structure. Second, employees differ in their valuations of benefits and it is costly for workers to match with firms that offer the benefits they value. Finally, some benefits can reduce the marginal cost to an employee of extra working time. I develop a simple model that integrates these factors. I then generate empirical implications of the model and use data from the National Longitudinal Survey of Youth to test these implications. I examine access to employer-provided meals, child-care, dental insurance, and health insurance. I also study how benefits are grouped together and differences between benefits packages at for-profit, not-for-profit, and government employers. The empirical analysis provides evidence consistent with all three factors in the model contributing to firms' decisions about which benefits to offer.
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number
11817.
Length: Date of creation: Dec 2005 Date of revision: Handle: RePEc:nbr:nberwo:11817
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Find related papers by JEL classification: J32 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Nonwage Labor Costs and Benefits; 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 - - - Compensation and Compensation Methods and Their Effects K31 - Law and Economics - - Other Substantive Areas of Law - - - Labor Law
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Emmanuelle Auriol & Régis Renault, 2007.
"Status and Incentives,"
THEMA Working Papers
2007-01, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise.
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