Flexible Work Arrangements and Precautionary Behavior: Theory and Experimental Evidence

Arbeitspapier

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.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: GLO Discussion Paper ; No. 493

Classification and Topics

• Classification: Wirtschaft ; Household Saving; Personal Finance ; Macroeconomics: Consumption; Saving; Wealth ; Time Allocation and Labor Supply ; Design of Experiments: Laboratory, Individual ; Criteria for Decision-Making under Risk and Uncertainty
• Subject: precautionary saving ; labor supply ; intertemporal substitution ; experiment

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Orland, Andreas ; Rostam-Afschar, Davud
• Event: Veröffentlichung
• (who): Global Labor Organization (GLO)
• (where): Essen
• (when): 2020

Further information

• Handle: http://hdl.handle.net/10419/214856
• Last update: 10.03.2025, 11:43 AM CET