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Time Compression

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  • David Aadland

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  • Sherrill Shaffer

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Abstract

Economists have generally ignored the notion that perceived time may differ from clock time. Borrowing from the behavioral psychology literature, we investigate the case of time compression whereby perceived time passes more quickly than actual time. A framework is presented to embed time compression in economic models. We then apply the principle to a standard lifecycle permanent income model with endogenous labor. Time compression provides an alternative explanation of why older individuals, even those without declining labor productivity, may choose to reduce their work effort.

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File URL: http://cama.crawford.anu.edu.au/pdf/working-papers/2012/282012.pdf
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Bibliographic Info

Paper provided by Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University in its series CAMA Working Papers with number 2012-28.

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Length: 36 pages
Date of creation: Jun 2012
Date of revision:
Handle: RePEc:een:camaaa:2012-28

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  1. Loewenstein, George & Prelec, Drazen, 1992. "Anomalies in Intertemporal Choice: Evidence and an Interpretation," The Quarterly Journal of Economics, MIT Press, vol. 107(2), pages 573-97, May.
  2. Akerlof, George A & Yellen, Janet L, 1990. "The Fair Wage-Effort Hypothesis and Unemployment," The Quarterly Journal of Economics, MIT Press, vol. 105(2), pages 255-83, May.
  3. Caliendo, Frank & Aadland, David, 2007. "Short-term planning and the life-cycle consumption puzzle," Journal of Economic Dynamics and Control, Elsevier, vol. 31(4), pages 1392-1415, April.
  4. Milton Friedman, 1957. "A Theory of the Consumption Function," NBER Books, National Bureau of Economic Research, Inc, number frie57-1.
  5. Matthew Rabin & Ted O'Donoghue, 1999. "Doing It Now or Later," American Economic Review, American Economic Association, vol. 89(1), pages 103-124, March.
  6. Emmanuel Saez, 2002. "Optimal Income Transfer Programs: Intensive Versus Extensive Labor Supply Responses," The Quarterly Journal of Economics, MIT Press, vol. 117(3), pages 1039-1073, August.
  7. Fairris, D. & Alston, L.J., 1992. ""Wages and the Intensity of Labor Effort: Efficiency Wages Versus Compensating Payments"," The A. Gary Anderson Graduate School of Management 92-43, The A. Gary Anderson Graduate School of Management. University of California Riverside.
  8. Heckman, James J, 1976. "A Life-Cycle Model of Earnings, Learning, and Consumption," Journal of Political Economy, University of Chicago Press, vol. 84(4), pages S11-44, August.
  9. Laibson, David I., 1997. "Golden Eggs and Hyperbolic Discounting," Scholarly Articles 4481499, Harvard University Department of Economics.
  10. Filer, Randall K., 1987. "Joint estimates of the supply of labor hours and the intensity of work effort," Journal of Behavioral Economics, Elsevier, vol. 16(3), pages 1-12.
  11. Shapiro, Carl & Stiglitz, Joseph E, 1984. "Equilibrium Unemployment as a Worker Discipline Device," American Economic Review, American Economic Association, vol. 74(3), pages 433-44, June.
  12. Dora L. Costa, 1998. "The Evolution of Retirement: An American Economic History, 1880-1990," NBER Books, National Bureau of Economic Research, Inc, number cost98-1.
  13. Milton Friedman, 1957. "Introduction to "A Theory of the Consumption Function"," NBER Chapters, in: A Theory of the Consumption Function, pages 1-6 National Bureau of Economic Research, Inc.
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Blog mentions

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  1. On the perception of time
    by Economic Logician in Economic Logic on 2011-04-18 14:38:00

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