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Flexible Work Arrangements and Precautionary Behavior: Theory and Experimental Evidence

Andreas Orland () and Davud Rostam-Afschar

No 493, GLO Discussion Paper Series from Global Labor Organization (GLO)

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.

Keywords: precautionary saving; labor supply; intertemporal substitution; experiment (search for similar items in EconPapers)
JEL-codes: D14 E21 J22 C91 D81 (search for similar items in EconPapers)
Date: 2020
New Economics Papers: this item is included in nep-exp, nep-lma and nep-mac
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:glodps:493

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