We would like to invite you to participate in Management Engineering (ME) Seminar.
1. When: June 25th(Mon) 12:00~13:30
2. Where: SUPEX Building, 3rd floor, Lecture Room 301
3. Speaker: Prof. Suresh Naidu (Columbia Univ.)
4. Topic: Monopsony and Employer Mis-optimization Account for Round Number Bunching in the Wage Distribution
5. Research field: Managerial Economics
* Lunch is provided during the seminar.
* Lecture will be delivered in English.

Abstract:
We show that wages in administrative data and in online markets exhibit considerable bunching at round numbers that cannot all be explained by rounding of responses in survey data. We consider two hypotheses—worker left-digit bias and employer optimization frictions—and derive tests to distinguish between the two. Symmetry of the missing mass distribution around the round number suggests that optimization frictions are more important. We show that a more monopsonistic market requires less optimization frictions to rationalize the bunching in the data, and use this to derive bounds on employer market power. We provide experimental validation of these results from online labor markets, where rewards are also highly bunched at round numbers. By randomizing wages for an identical task, our online experiment provides an independent estimate of the extent of employer market power, and fails to find evidence of any discontinuity in the labor supply function as predicted by workers’ left-digit bias. Overall, the extent and form of round-number bunching suggests both employer mis-optimization and wage setting power are important features of the labor market.