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 University Library of Munich, Germany in its series MPRA Paper with number 29298.
Date of creation: 01 Oct 2010
Date of revision:
Time Compression; Discounting; Lifecycle Permanent Income Model; Retirement;
Other versions of this item:
- D03 - Microeconomics - - General - - - Behavioral Economics; Underlying Principles
- D91 - Microeconomics - - Intertemporal Choice and Growth - - - Intertemporal Consumer Choice; Life Cycle Models and Saving
This paper has been announced in the following NEP Reports:
- NEP-AGE-2011-03-19 (Economics of Ageing)
- NEP-ALL-2011-03-19 (All new papers)
- NEP-EVO-2011-03-19 (Evolutionary Economics)
- NEP-HPE-2011-03-19 (History & Philosophy of Economics)
- NEP-LAB-2011-03-19 (Labour Economics)
- NEP-MIC-2011-03-19 (Microeconomics)
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