Riches to rags every month?
Subtitle: the fall in consumption expenditures between paydays
By: by David Huffman, Matias Barenstein.
Contributors: Barenstein, Matias.
Series: Discussion paper ;; no. 1430; Discussion paper (Forschungsinstitut zur Zukunft der Arbeit : Online) ;; no. 1430
Publisher: IZA
Published: 2004
Place of publication: Bonn, Germany
Language: eng
Format: Electronic resource
Subjects: Paydays -- Great Britain.; Consumption (Economics) -- Great Britain.
Description: "This paper finds declining consumption expenditure between paydays, for a typical household in the working population of the UK. The magnitude is inconsistent with exponential time preference, but compatible with quasi-hyperbolic discounting. However, the hyperbolic model predicts that credit constraints drive the decline, and we find only mixed evidence in this regard. We also observe a method-of-payment result that suggests a role for mental accounting: households choose declining cash spending but flat credit-card spending over the pay period. We propose an alternative explanation for the results, based on cognitive costs of budgeting and perceptual biases, rather than self-control problems"--Forschungsinstitut zur Zukunft der Arbeit web site.
Notes: Includes bibliographical references.
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