Full Citation
Title: Waiting for the Paycheck: Individual and Aggregate Effects of Wage Payment Frequency
Citation Type: Working Paper
Publication Year: 2016
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Abstract: This paper shows that the frequency at which workers are paid affects the within-month patterns of both household expenditure and aggregate economic activity. To identify causal effects, I exploit two novel sources of exogenous variation in pay frequency in the US. First, using a (as-good-as-random) variation in the pay frequency of retired couples, I show that those who are paid more frequently have smoother expenditure paths. Second, I take advantage of the cross-state variation in laws, and compare the patterns of economic activity in states with different legislation on pay frequency of wages. I document that low pay frequencies lead to within-month business cycles when many workers are paid on the same dates, which generates costly congestion in sectors with capacity constraints. These findings have important policy implications in a context where firms and workers do not internalize such congestion externalities, which generates market equilibria with suboptimally low pay frequencies.
Url: https://cadmus.eui.eu/handle/1814/40804
User Submitted?: No
Authors: Berniell, Ines
Series Title: EUI Working Papers
Publication Number: 2016_05
Institution: European University Institute
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Data Collections: IPUMS Time Use - ATUS
Topics: Labor Force and Occupational Structure, Other
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