14:15 - 15:45
Worker Beliefs About Rents and Outside Options
We measure workers’ beliefs about rents and outside options in a representative sample of German workers, and compare these beliefs with proxies for actual outside options. While subjective worker rents are large - 14% of salary on average - they do not stem from workers’ subjective wage premia at their current firm, but are entirely derived from non-wage amenities.
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Benjamin Schoefer is Assistant Professor of Economics at University of California, Berkeley.
When comparing workers’ subjective outside options against objective measures of pay premia from matched employer-employee data, we find that many workers mistakenly believe their current wage is representative of the external labor market-objectively low-paid (high-paid) workers are overpessimistic (overoptimistic) about their outside options. If workers had correct beliefs about outside options, 13% of jobs would not be viable at current wages, concentrated in the low-wage segment of the labor market. Finally, we show that in an equilibrium model,misinformation about outside options gives employers monopsony power. Read more ...
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