Income Smoothing and Self Control: The Case of Schoolteachers
AbstractClose to half the California school districts let teachers choose whether to receive their salaries ten monthly payments or in twelve. Fisherine intertemporal maximization implies that they should choose ten payments and earn interest on their savings for their summer. But about half choose twelve installments, even though when summed over a reasonable period the foregone interest is considerable. This 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.
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Bibliographic InfoPaper provided by University of California at Davis, Department of Economics in its series Working Papers with number 02-8.
Date of creation: 2002
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Other versions of this item:
- Thomas Mayer & Thomas Russell, 2005. "Income Smoothing and Self-Control: The Case of Schoolteachers," Economic Inquiry, Western Economic Association International, vol. 43(4), pages 823-830, October.
- 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 and Growth - - - Intertemporal Consumer Choice; Life Cycle Models and Saving
- D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
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