Coarse Salary-Setting and Behavioral Teams

Chengyuan Hua
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Chengyuan Hua: West Virginia University

No 25-05, Working Papers from Department of Economics, West Virginia University

Abstract: Among National Hockey League (NHL) player contracts signed in 2011-24, over 38% are divisible by $100,000. This paper shows that the bunching of NHL contracts at round numbers is partly driven by team coarse wage-setting. I first show that teams with more coarse contracts have worse team performance. Then, my empirical results validate two model predictions derived from a wage-setting model in which optimization costs lead to the adoption of rounded wages. With a novel measure of management quality, I document a negative relationship between management quality and coarse salary-setting. Next, I find that coarse salary-setting is associated with higher pay inequality. Finally, I do not identify spillover effects of changes in minimum salaries on coarse salary-setting as documented in the previous literature.

Keywords: Coarse wage-setting; firm behavior; pay inequality (search for similar items in EconPapers)
JEL-codes: D22 D91 J31 Z22 (search for similar items in EconPapers)
Pages: 17 pages
Date: 2025-10
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Persistent link: https://EconPapers.repec.org/RePEc:wvu:wpaper:25-05

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