Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/316717 
Year of Publication: 
2025
Series/Report no.: 
IZA Discussion Papers No. 17762
Publisher: 
Institute of Labor Economics (IZA), Bonn
Abstract: 
This paper yields new insights into why similar workers are paid differently by surveying a representative sample of Danish firms and linking responses to administrative data. We find that a substantial minority of firms, about 18 percent, have inaccurate beliefs about their position in the wage distribution. Inaccurate beliefs are more likely to occur in smaller firms. To study the implications of firms' inaccurate beliefs, we build a simple model with monopsonistic firms. Using our survey, we elicit firms' motives for setting high wages. The dominant motive aligns with wage-posting models, i.e., retaining and attracting new employees. The least common motive is compensating for negative job characteristics.
Subjects: 
firm information frictions
wage dispersion
biased beliefs
JEL: 
J01
J31
J42
D83
M52
Document Type: 
Working Paper

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