Resource title

Riches to Rags Every Month? : The Fall in Consumption Expenditures Between Paydays

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Resource 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.

Resource author

David Huffman, Matias Barenstein

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Resource publish date

Resource language

eng

Resource content type

text/html

Resource resource URL

http://hdl.handle.net/10419/20728

Resource license

Adapt according to the presented license agreement and reference the original author.