Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/214856
Authors: 
Orland, Andreas
Rostam-Afschar, Davud
Year of Publication: 
2020
Series/Report no.: 
GLO Discussion Paper 493
Abstract: 
In the past years, work time in many industries has become increasingly flexible opening up a new channel for intertemporal substitution. To study this, we set up a two-period model with wage uncertainty. This extends the standard savings model by allowing a worker to allocate a fixed time budget between two work-shifts or to save. To test the existence of these channels, we conduct laboratory consumption/saving experiments. A novel feature of our experiments is that we tie them to a real-effort style task. In four treatments, we turn on and off the two channels for consumption smoothing: saving and time allocation. Our four main findings are: (i) subjects exercise more effort under certainty than under risk; (ii) savings are strictly positive for at least 85 percent of subjects (iii) a majority of subjects uses time allocation to smooth consumption; (iv) saving and time shifting are substitutes, though not perfect substitutes.
Subjects: 
precautionary saving
labor supply
intertemporal substitution
experiment
JEL: 
D14
E21
J22
C91
D81
Document Type: 
Working Paper

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