Template-Type: ReDIF-Paper 1.0
Title: Coarse Wage-Setting and Behavioral Firms
Author-Name: Germán Reyes
Author-Email:german.reyes@briq-institute.edu
Classification-JEL: D22, E24, D91.
Keywords: Wage-setting, bunching at round numbers; behavioral firms


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 are less sophisticated
and 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.


Note: 
Length: 84
Creation-Date: 2024-01
Revision-Date:
File-URL: https://www.crctr224.de/research/discussion-papers/archive/dp492
File-Format: application/pdf
Handle: RePEc:bon:boncrc:CRCTR224_2024_492