TY  - JOUR
A1  - Orland, Andreas
A1  - Rostam-Afschar, Davud
T1  - Flexible work arrangements and precautionary behavior
T2  - Journal of economic behavior & organization
N2  - In the past years, work-time in many industries has become more flexible, opening up a new channel for intertemporal substitution: workers might, instead of saving, adjust their work-time to smooth consumption. To study this channel, we set up a two-period consumption/saving model with wage uncertainty. This extends the standard saving model by also allowing a worker to allocate a fixed time budget between two work-shifts. To test the comparative statics implied by these two different channels, we conduct a laboratory experiment. A novel feature of our experiments is that we tie income 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 main finding is that savings are strictly positive for at least 85 percent of subjects. We find that a majority of subjects also uses time allocation to smooth consumption and use saving and time shifting as substitutes, though not perfect substitutes. Part of the observed heterogeneity of precautionary behavior can be explained by risk preferences and motivations different from expected utility maximization. (c) 2021 Elsevier B.V. All rights reserved.
KW  - Precautionary saving
KW  - Labor supply
KW  - Intertemporal substitution
KW  - Experiment
Y1  - 2021
UR  - https://publishup.uni-potsdam.de/frontdoor/index/index/docId/63162
SN  - 0167-2681
SN  - 1879-1751
VL  - 191
SP  - 442
EP  - 481
PB  - Elsevier
CY  - Amsterdam
ER  -