Present-bias in different income groups
AbstractThe excessive use of credit cards and increasing consumer borrowing has been a major problem. Laibson (1997) suggests the present-bias problem as one of the driving forces of excessive borrowing. Shefrin and Thaler (1988) suggest that self-control underlies national borrowing/savings rate. We conduct a survey to check for present-bias as well as self-control problems among individuals in Turkey. Our fi ndings show that diff erent income groups have similar discount factors, i.e., impatience levels, but very diff erent degrees of dynamic inconsistencies, i.e. present-bias levels. In particular, 29.4% of low-income individuals exhibit present-bias whereas this is down to 6.4% for high-income individuals. Using the parameters we achieve through the surveys, policymakers can design appropriate commitment devices for time-inconsistent individuals to ensure a sustainable level of aggregate saving and fi nancial investment.
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Bibliographic InfoPaper provided by Maastricht : GSBE, Graduate School of Business and Economics in its series Research Memorandum with number 008.
Date of creation: 2013
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Web page: http://www.maastrichtuniversity.nl/web/UMPublications.htm
Field Experiments; Personal Finance; Intertemporal Consumer Choice; Life Cycle Models and Saving;
Find related papers by JEL classification:
- C93 - Mathematical and Quantitative Methods - - Design of Experiments - - - Field Experiments
- D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
- D91 - Microeconomics - - Intertemporal Choice - - - Intertemporal Household Choice; Life Cycle Models and Saving
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-06-16 (All new papers)
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