We show that administrative hourly wage data exhibit considerable bunching at round numbers. We run two experiments randomizing wages around $0.10 and $1.00 to experimentally measure left-digit bias for identical tasks on Amazon Mechanical Turk; we fail to find any evidence of discontinuity in the labor supply function at round numbers despite estimating a considerable degree of monopsony. We replicate these results in administrative worker-firm hourly wage data from Oregon. We can rule out inattention estimates found in the behavioral product market literature. We provide evidence that firms "misoptimize" wage setting. More monopsony requires less employer misoptimization to explain bunching.

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1 August 2025

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American Economic Review 115(8) , pp.2689?2721, 2025

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DOI: 10.1257/aer.20200678

https://www.aeaweb.org/articles?id=10.1257/aer.20200678

This Journal article is published under the centre's Labour programme.