HIV/AIDS, Risk Aversion and Intertemporal Choice
AbstractThis study analyses the relation between perceived health status and intertemporal choice. We use data from experiments with real monetary rewards conduEted among students in South Africa to estimate risk and time preferences. These experimental data, based on muitiple price lists developed by Coller & Williams (1999), Holt & Laury (2002), and Harrison et al. (2002, 2005), show that HIV+ agents and participants that perceive to have a high HIV contraction risk are less risk-averse. Although the latter group displays higher discount rates, HP positive agents seem to have substantially lower discount rates, indicating longer time horizons in spite of their lowered life expectancy. However, we show that direct estimates of discount rates can be seriously biased estimators of the pure rate of time preference when other factors than just the pure rate of time preference are not considered simultaneously. We correct for differential mortality risk, risk aversion and differences in anticipated future marginal utility increases and price in these factors when calculating pure rates of time preference from observed discount rates. Once these factors are taken into account, HIV+ agents’ time preferences conform to expectations.
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Bibliographic InfoPaper provided by Tinbergen Institute in its series Tinbergen Institute Discussion Papers with number 07-098/1.
Date of creation: 18 Dec 2007
Date of revision: 31 Jan 2008
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discount rate; risk aversion; perceived HIV infection risk; mortality; time preferences; marginal utility; hyperbolic discounting;
Find related papers by JEL classification:
- D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
- D91 - Microeconomics - - Intertemporal Choice - - - Intertemporal Household Choice; Life Cycle Models and Saving
- I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health
This paper has been announced in the following NEP Reports:
- NEP-AFR-2008-02-23 (Africa)
- NEP-ALL-2008-02-23 (All new papers)
- NEP-DEV-2008-02-23 (Development)
- NEP-HEA-2008-02-23 (Health Economics)
- NEP-UPT-2008-02-23 (Utility Models & Prospect Theory)
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