AbstractEconomists 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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Bibliographic InfoPaper 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.
Length: 36 pages
Date of creation: Jun 2012
Date of revision:
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Other versions of this item:
- D03 - Microeconomics - - General - - - Behavioral Microeconomics; Underlying Principles
- D91 - Microeconomics - - Intertemporal Choice - - - Intertemporal Household Choice; Life Cycle Models and Saving
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