INCOME SMOOTHING AND SELF‐CONTROL: THE CASE OF SCHOOLTEACHERS | Zendy

Mayer Thomas | Zendy; Russell Thomas | Zendy

AI Assistant Blog Pricing

Home ZAIA Blog

Premium

INCOME SMOOTHING AND SELF‐CONTROL: THE CASE OF SCHOOLTEACHERS

Author(s) -

Mayer Thomas,

Russell Thomas

Publication year - 2005

Publication title -

economic inquiry

Language(s) - English

Resource type - Journals

SCImago Journal Rank - 0.823

H-Index - 72

eISSN - 1465-7295

pISSN - 0095-2583

DOI - 10.1093/ei/cbi060

Subject(s) - economics , utility maximization , discounting , consumption smoothing , payment , econometrics , maximization , control (management) , hyperbolic discounting , time preference , microeconomics , macroeconomics , finance , mathematical economics , management , business cycle

Approximately one‐half of California's Unified School Districts give teachers a choice of receiving their annual salaries in 10 or 12 monthly payments. Intertemporal utility maximization à la Irving Fisher suggests that they should choose 10 payments and earn interest on their savings. But about 50% of the teachers choose 12 installments, even though when summed over a reasonable period the forgone interest can be considerable. This behavior 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. (JEL D91 , D12 )

This content is not available in your region!

Continue researching here.

Having issues? You can contact us here

Accelerating Research