Firms' Beliefs About Wage Setting

Antoine Bertheau and Christian Hoeck

No 25133, RFBerlin Discussion Paper Series from ROCKWOOL Foundation Berlin (RFBerlin)

Abstract: This paper provides new evidence on why similar workers receive different pay by linking administrative data to a large-scale, representative survey of Danish firms. We find that about 18 percent of firms hold inaccurate beliefs about their position in the wage distribution, with such misperceptions more common in smaller firms. Survey responses reveal that, by far, the primary motive for setting high wages is to retain and attract employees, consistent with wage-posting models. Differences in firm amenities, both positive and negative, also help explain pay variation across firms.

Keywords: Wage dispersion; firm information frictions, biased beliefs (search for similar items in EconPapers)
JEL-codes: D83 J01 J31 J42 M52 (search for similar items in EconPapers)
Date: 2025-12
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Persistent link: https://EconPapers.repec.org/RePEc:crm:wpaper:25133

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