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Estimating Child Time Preferences: Aiding Rural Schools in Improving Human Capital Formation

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  • Jordan, Jeffrey L.
  • Castillio, Marco
  • Ferraro, Paul J.
  • Petrie, Regan

Abstract

We experimentally investigate the distribution of children's time preferences along gender and racial lines. Black boys have significantly larger discount rates than any other demographic group. Discount rates among Black girls are comparable to rates among White girls. Although White boys exhibit higher discount rates than girls, the difference is small and not statistically significant. These results are robust to alternative measures of patience and to regression analyses that control for socio-economic background and school performance. The measured differences in discount rates are large. All things equal, a Black boy requires expected returns to education 13-15% higher than Black girls to compensate for his larger discounting of future payoffs. Equally importantly, we show that impatience, as measured by discount rates, has a direct effect on behavior. An increase of one standard deviation in the discount rate increases by 5 percent the probability that a child incurs at least 3 school-related disciplinary actions. This result suggests that experiments capture new and relevant information on children. Overall, our results suggests that time preferences might play a large role in setting appropriate incentives for children. Understanding the factors behind these differences in preferences is an important area for future research.

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Bibliographic Info

Paper provided by American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association) in its series 2008 Annual Meeting, July 27-29, 2008, Orlando, Florida with number 6368.

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Date of creation: 2008
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Handle: RePEc:ags:aaea08:6368

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Keywords: Community/Rural/Urban Development; Labor and Human Capital;

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  1. Catherine Eckel & Cathleen Johnson & Claude Montmarquette, 2010. "Human Capital Investment by the Poor: Informing Policy with Laboratory and Field Experiments," CIRANO Working Papers 2010s-33, CIRANO.
  2. Pender, John L., 1996. "Discount rates and credit markets: Theory and evidence from rural india," Journal of Development Economics, Elsevier, vol. 50(2), pages 257-296, August.
  3. Glenn W. Harrison & Morten I. Lau & Melonie B. Williams, 2002. "Estimating Individual Discount Rates in Denmark: A Field Experiment," American Economic Review, American Economic Association, vol. 92(5), pages 1606-1617, December.
  4. Eric Bettinger & Robert Slonim, 2006. "Patience among children," Artefactual Field Experiments 00043, The Field Experiments Website.
  5. Becker, Gary S & Mulligan, Casey B, 1997. "The Endogenous Determination of Time Preference," The Quarterly Journal of Economics, MIT Press, vol. 112(3), pages 729-58, August.
  6. John List & David Reiley, 2008. "Field experiments," Artefactual Field Experiments 00091, The Field Experiments Website.
  7. Lang, Kevin & Ruud, Paul A, 1986. "Returns to Schooling, Implicit Discount Rates and Black-White Wage Differentials," The Review of Economics and Statistics, MIT Press, vol. 68(1), pages 41-47, February.
  8. Jerry A. Hausman, 1979. "Individual Discount Rates and the Purchase and Utilization of Energy-Using Durables," Bell Journal of Economics, The RAND Corporation, vol. 10(1), pages 33-54, Spring.
  9. Uri Benzion & Amnon Rapoport & Joseph Yagil, 1989. "Discount Rates Inferred from Decisions: An Experimental Study," Management Science, INFORMS, vol. 35(3), pages 270-284, March.
  10. Charles A. Holt & Susan K. Laury, 2002. "Risk Aversion and Incentive Effects," American Economic Review, American Economic Association, vol. 92(5), pages 1644-1655, December.
  11. Thaler, Richard, 1981. "Some empirical evidence on dynamic inconsistency," Economics Letters, Elsevier, vol. 8(3), pages 201-207.
  12. Stephan Meier & Charles Sprenger, 2007. "Impatience and credit behavior: evidence from a field experiment," Working Papers 07-3, Federal Reserve Bank of Boston.
  13. Maribeth Coller & Melonie Williams, 1999. "Eliciting Individual Discount Rates," Experimental Economics, Springer, vol. 2(2), pages 107-127, December.
  14. Ausubel, Lawrence M, 1991. "The Failure of Competition in the Credit Card Market," American Economic Review, American Economic Association, vol. 81(1), pages 50-81, March.
  15. Marjorie K. Shelley, 1993. "Outcome Signs, Question Frames and Discount Rates," Management Science, INFORMS, vol. 39(7), pages 806-815, July.
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