  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.
