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Income Smoothing and Self Control: The Case of Schoolteachers

Author

Listed:
  • Thomas Mayer
  • Thomas Russell

    (Department of Economics, University of California Davis)

Abstract

Close 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.

Suggested Citation

  • Thomas Mayer & Thomas Russell, 2003. "Income Smoothing and Self Control: The Case of Schoolteachers," Working Papers 281, University of California, Davis, Department of Economics.
    • Handle: RePEc:cda:wpaper:281
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    File URL: https://repec.dss.ucdavis.edu/files/5JMDANX7CHNrzbWa3Ui9gXDN/02-8.pdf
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    References listed on IDEAS

    as
    1. Schelling, Thomas C, 1984. "Self-Command in Practice, in Policy, and in a Theory of Rational Choice," American Economic Review, American Economic Association, vol. 74(2), pages 1-11, May.
    2. Thaler, Richard H & Shefrin, H M, 1981. "An Economic Theory of Self-Control," Journal of Political Economy, University of Chicago Press, vol. 89(2), pages 392-406, April.
    3. David Laibson, 1997. "Golden Eggs and Hyperbolic Discounting," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 112(2), pages 443-478.
    Full references (including those not matched with items on IDEAS)

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    Cited by:

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    More about this item

    Keywords

    Self Control; Intertemporal Utility Maximization;

    JEL classification:

    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis

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