The impact of fringe benefits on payment profiles

Stavros Drakopoulos, John Douglas Skåtun*

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review


Several explanations are proposed for the observed domination of wages in the wage-fringe benefit mix. Domination occurs if fringe benefits are taxed at a higher level or marginal rate, or if trading fringe benefits incurs transaction costs. A central result shows wage domination, even in the absence of these effects, due to intertemporal effects of durable fringe benefits, which can be consumed in periods of disagreement. This enables workers to extract a higher bargaining surplus, and leads the firm to resist fringe benefit payments. Finally, the paper gives a novel reason for tenure effects in both wages and fringe benefits.

Original languageEnglish
Pages (from-to)81-99
Number of pages19
JournalResearch in Economics
Issue number1
Publication statusPublished - Mar 1998


  • Fringe benefits
  • Tenure effects
  • Wage-dominance


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