The last two weeks have been very hectic, having received my remaining college decisions and finished my preliminary outline for my final project paper. By tomorrow, I plan to have my final outline done so that I can begin work on my first draft later in the week. Although I anticipate continuing to learn more about my topic in the coming weeks, here are some of the findings I have found most surprising and/or interesting so far.
Although I said in my last post that researchers believe that consumption spikes around the days of payment receipt are caused by a combination of three factors (liquidity constraints, present bias, and/or impatience) there is a fourth possibility: perceptual bias. The reasoning here is that consumers may think of spending right after payday as being less costly than spending later in the cycle and so choose to spend more immediately. This explanation is the least explored of the four and more research would have to be done to determine its role in said consumption spikes.
In terms of payment distribution frequency, some of the microeconomic benefits of more frequent payment is that it helps workers smooth their consumption (in most cases), protects certain vulnerable populations from drug related hospitalization, and may, in some cases, make workers more productive and willing to work longer hours. On the larger scale, such a payment scheme helps to smooth aggregate consumption, reducing congestion in places like supermarkets and hospitals, reduces rates of financially motivated crimes, and even helps reduce spikes in carbon emissions and traffic accidents. On the other hand, less frequent payment helps those who are limited in the amount of trips they can take to stores or just those who prefer to buy in bulk. It may also encourage healthy savings practices, leading to more investment and purchasing of more expensive durable goods. There is also the matter of decreased transaction costs for firms, although advances in technology are making this less relevant.
For my internship, meanwhile, I have ran regressions for all of the tables I constructed and have spent the last few days learning how to make effective graphs in Stata. In the next few days I will share my findings with my advisors and I may even get a chance to share them with the rest of the department in the coming weeks.