Empirically, women who are married to a spouse who has access to health insurance earn higher wages and are less likely to be offered employer-sponsored health insurance than are married women whose spouse does not have access to health insurance. This pattern
A) is unexpected as wages should be unrelated to fringe benefits.
B) supports the theory of compensating differentials as it indicates there is a trade-off between wages and benefits.
C) supports the theory of compensating differentials as it indicates there is no trade-off between wages and benefits.
D) fails to provide support for the theory of compensating differentials.
E) contradicts the result that the hedonic wage function is upward sloping.

Question

Quizplus · Accepted Answer

This pattern supports the theory of compensating differentials, which suggests that there is a trade-off between wages and benefits. In this case, women with a spouse who has health insurance (and thus potentially less need for employer-sponsored health insurance) earn higher wages, possibly because they are willing to accept higher wages in lieu of benefits.

Empirically, Women Who Are Married to a Spouse Who Has