Coarse Wage-Setting and Behavioral Firms

No 17039, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: This paper shows that the bunching of wages at round numbers is partly driven by firm coarse wage-setting. Using data from over 200 million new hires in Brazil, I first establish that contracted salaries tend to cluster at round numbers. Then, I show that firms that tend to hire workers at round-numbered salaries have worse market outcomes. Next, I develop a wage-posting model in which optimization costs lead to the adoption of coarse rounded wages and provide evidence supporting two model predictions using two research designs. Finally, I examine some consequences of coarse wage-setting for relevant economic outcomes.

Keywords: behavioral firms; bunching at round numbers; wage-setting (search for similar items in EconPapers)
JEL-codes: D22 D91 E24 (search for similar items in EconPapers)
Pages: 88 pages
Date: 2024-05
New Economics Papers: this item is included in nep-lma
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://docs.iza.org/dp17039.pdf (application/pdf)

Related works:
Working Paper: Coarse Wage-Setting and Behavioral Firms (2024)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:iza:izadps:dp17039

Ordering information: This working paper can be ordered from
IZA, Margard Ody, P.O. Box 7240, D-53072 Bonn, Germany

Access Statistics for this paper

More papers in IZA Discussion Papers from Institute of Labor Economics (IZA) IZA, P.O. Box 7240, D-53072 Bonn, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Holger Hinte ().