Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/299967 
Authors: 
Year of Publication: 
2024
Series/Report no.: 
IZA Discussion Papers No. 17039
Publisher: 
Institute of Labor Economics (IZA), Bonn
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.
Subjects: 
behavioral firms
bunching at round numbers
wage-setting
JEL: 
D22
E24
D91
Document Type: 
Working Paper

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