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Presented By: Department of Economics

Firm Premia in Pay vs. Amenities

Anders Humlum, Booth School of Business, University of Chicago

Anders Humlum Headshot Anders Humlum Headshot
Anders Humlum Headshot
This paper develops a new approach to measuring non-wage amenities and compensating differentials in the labor market. Using a survey of 20,000 job movers in Denmark, we elicit workers’ reservation wage to return to their previous job. Our sample contains a large, connected network of firms, enabling us to estimate firm-wide premia and match effects in amenities. Overall, higher-paying firms provide slightly worse non-pay amenities. Although they provide better perks and flexibility, they also come with higher layoff risk, faster work pace, and greater stress. On average, moves to jobs offering 10% higher pay involve a 5% reduction in the value of amenities, with 0.7% attributable to firm-wide tradeoffs and the remainder attributable to match effects. Using a standard search model, we quantify the role of amenities in labor market inequality while accounting for endogenous mobility. While firms in the top wage decile pay 16% more than those in the bottom decile, the difference in total utility remains substantial at 12% of wages, reflecting that most amenity-wage tradeoffs are idiosyncratic.

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