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.
This content is only available as a PDF.
© 2024 by the President and Fellows of Harvard College and the Massachusetts Institute of Technology
2024
The President and Fellows of Harvard College and the Massachusetts Institute of Technology
You do not currently have access to this content.