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

  • Eriksson, Tor

    ()

    (Department of Economics, Aarhus School of Business)

  • Kristensen, Nicolai

    ()

    (Danish Institute for Governmental Research and IZA)

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.

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Paper provided by University of Aarhus, Aarhus School of Business, Department of Economics in its series Working Papers with number 10-16.

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Length: 43 pages
Date of creation: 01 Nov 2010
Date of revision:
Handle: RePEc:hhs:aareco:2010_016
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The Aarhus School of Business, Prismet, Silkeborgvej 2, DK 8000 Aarhus C, Denmark

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