Present-Biased Preferences and Money Demand

Participants in the De Nederlandsche Bank Household Survey (DHS) were asked for how much they would require as to accept a delay in receiving a financial reward. The answers of most participants indicate present-bias as they require a higher annualized nominal rate of return for a three month delay than for a twelve month delay. One way to deal with one's present-bias problem is to impose limits on future spending by holding wealth in non liquid assets. We therefore predict that agents with more severe present-bias problems hold a lower share of their wealth as money. Our data provide statistically significant evidence in support of this prediction

Dynamically Inconsistent Preferences and Money Demand

This paper focuses on two main issues. First, we find that, on average, households’ discount rates decline. This implies dynamically inconsistent preferences. Second, we calculate an indicator of the degree of dynamic inconsistency that may help us to understand how households overcome their self-control problems. We use a micro dataset containing households’ reports on the compensation for receiving hypothetical rewards with delays. We find that individuals with more severely dynamicly inconsistent preferences on average hold a statistically significantly lower share of their total wealth in checking accounts. A possible interpretation is that subjects use precommitment strategies to limit their temptation to consume immediately

Dynamically Inconsistent Preferences and Money Demand

This paper focuses on two main issues. First, we find that, on average, households’ discount rates decline. This implies dynamically inconsistent preferences. Second, we calculate an indicator of the degree of dynamic inconsistency that may help us to understand how households overcome their self-control problems. We use a micro dataset containing households’ reports on the compensation for receiving hypothetical rewards with delays. We find that individuals with more severely dynamicly inconsistent preferences on average hold a statistically significantly lower share of their total wealth in checking accounts. A possible interpretation is that subjects use precommitment strategies to limit their temptation to consume immediately

Evaluating how predictable errors in expected income affect consumption

This article studies whether anomalies in consumption can be explained by a behavioural model in which agents make predictable errors in forecasting income. We use a micro-data set containing subjective expectations about future income. This article shows that the null hypothesis of rational expectations is rejected in favour of the behavioural model, since consumption responds to predictable forecast errors. On average, agents who we predict are too pessimistic increase consumption after the predictable positive income shock. On average, agents who are too optimistic reduce the consumption

Do Flexibility Measures Affect the Wage Share? An Empirical Analysis of Selected European Countries

Since the beginning of the 1980s, reforms of the labour market have been at the centre of political and economic debate in the European Union. While these reforms were implemented mainly with the aim of improving employment performance by removing structural issues, they may also have had non-secondary and non-negligible effects on the share of national income received by workers. The aim of this paper is to study the effects of the changes in the labour market regulation index (LMRI) on the wage share in twelve Eurozone countries between 2000 and 2019. The empirical results — obtained from the estimation of an error correction model (ECM) — show that: (i) an inverse relation exists between LMRI as a whole and adjusted wage share in the short run only; (ii) the reduction of the adjusted wage share depends mainly on two specific measures of flexibility: a more decentralized level of bargaining (the effects of which are significant in both long- and short-run periods) and a relaxation of the hiring and firing regulations (the effects of which are significant only in the short run); (iii) the economic growth and unemployment rate also contribute to the decline of the adjusted wage share

Do Flexibility Measures Affect the Wage Share? An Empirical Analysis of Selected European Countries

Since the beginning of the 1980s, reforms of the labour market have been at the centre of political and economic debate in the European Union. While these reforms were implemented mainly with the aim of improving employment performance by removing structural issues, they may also have had non-secondary and non-negligible effects on the share of national income received by workers. The aim of this paper is to study the effects of the changes in the labour market regulation index (LMRI) on the wage share in twelve Eurozone countries between 2000 and 2019. The empirical results - obtained from the estimation of an error correction model (ECM) - show that: (i) an inverse relation exists between LMRI as a whole and adjusted wage share in the short run only; (ii) the reduction of the adjusted wage share depends mainly on two specific measures of flexibility: a more decentralized level of bargaining (the effects of which are significant in both long- and short-run periods) and a relaxation of the hiring and firing regulations (the effects of which are significant only in the short run); (iii) the economic growth and unemployment rate also contribute to the decline of the adjusted wage share