Nov 2021

14:15 - 15:45
IWH Research Seminar

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.

Benjamin Schoefer  (University of California)
IWH conference room and via Zoom
Benjamin Schoefer

Zur Person

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 ...

To join the lecture via ZOOM, please contact William McShane.

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Professor Dr. William McShane
Professor Dr. William McShane

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