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http://hdl.handle.net/10419/20728
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| Title: | | Riches to Rags Every Month? : The Fall in Consumption Expenditures Between Paydays  |
| Authors: | | Huffman, David Barenstein, Matias |
| Issue Date: | | 2004 |
| Series/Report no.: | | IZA Discussion paper series 1430 |
| Abstract: | | 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. |
| Subjects: | | consumption hyperbolic-discounting payday mental accounting reference-dependent preferences credit cards |
| JEL: | | D12 D11 J33 B49 |
| Document Type: | | Working Paper |
| Appears in Collections: | | IZA Discussion Papers, Forschungsinstitut zur Zukunft der Arbeit (IZA)
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