Sources of payments practices rigidity

Abstract

This paper studies the joint determination of the wage payments period between firms and employees. The aggregate timeseries analysis reaches two conclusions: a) the average payments period keep an equilibrium relationship with the previous inflation peak, this indicates some degree of irreversibility of payments practices. b) the low previous inflation peak .;:;_asticity of ave r age payments periods reveal.s a high degree of rigidity of payments practices.The framework developed in the paper incorporates the fol.l.owing sources of payments practices rigidity: a)interactions between optimal. payments period decisions and optimal. number of trips to the bank. b)the occurrence of Pare to inneficiencies in the bargaining process between firms and empl.oyees due to wage regulation. c) integer restrictions on payments frequencies produced by upper bounds on the payments period. The empirical. part of the paper assesses the rel.evance of these different sources of payments practices rigidity using Brazil.ian micro data.