Income Smoothing and Self-Control: The Case of Schoolteachers
AbstractApproximately one-half of California's Unified School Districts give teachers a choice of receiving their annual salaries in 10 or 12 monthly payments. Intertemporal utility maximization à la Irving Fisher suggests that they should choose 10 payments and earn interest on their savings. But about 50% of the teachers choose 12 installments, even though when summed over a reasonable period the forgone interest can be considerable. This behavior can be explained by the cost of exercising self-control and by Laibson's model of hyperbolic discounting. A survey of teachers supports this interpretation. (JEL D91, D12) Copyright 2005, Oxford University Press.
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Bibliographic InfoArticle provided by Western Economic Association International in its journal Economic Inquiry.
Volume (Year): 43 (2005)
Issue (Month): 4 (October)
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Other versions of this item:
- Thomas Mayer & Thomas Russell, 2003. "Income Smoothing and Self Control: The Case of Schoolteachers," Working Papers 28, University of California, Davis, Department of Economics.
- D91 - Microeconomics - - Intertemporal Choice - - - Intertemporal Household Choice; Life Cycle Models and Saving
- D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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