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Dynamic consistency in denmark: A longitudinal field experiment

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  • Glenn Harrison
  • Morten Lau
  • Elisabet Rutstrom

Abstract

Evidence that individuals have dynamically consistent preferences is usually generated by studying the discount rates of the individual over different horizons, but where those rates are elicited at a single point in time. If these elicited discount rates vary by horizon, the individual is typically claimed to have preferences that imply a dynamic inconsistency, although this inference requires additional assumptions such as intertemporal separability. However, what one really wants to know is if the same subject has the same discount rate function when that individual is asked at a later point in time. Such panel tests then require that one allow for possible changes in the states of nature that the subject faces, since they may confound any in-sample comparisons of discount rate functions at different points in time. We report the results of a large-scale panel experiment undertaken in the field that allows us to examine this issue. In June 2003, we elicited subjective discount rates from 253 subjects, representative of the adult Danish population. Between September 2003 and November 2004, we re-visited 97 of these subjects and repeated these tasks. In each visit, we also elicited information on their individual characteristics, as well as their expectations about the state of their own economic situation and macroeconomic variables. We find evidence in favor of dynamic consistency.

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File URL: http://karlan.yale.edu/fieldexperiments/papers/00060.pdf
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Bibliographic Info

Paper provided by The Field Experiments Website in its series Artefactual Field Experiments with number 00060.

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Date of creation: 2005
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Handle: RePEc:feb:artefa:00060

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Web page: http://www.fieldexperiments.com

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Cited by:
  1. Meier, Stephan & Sprenger, Charles, 2010. "Stability of Time Preferences," IZA Discussion Papers 4756, Institute for the Study of Labor (IZA).
  2. Xavier Giné & Jessica Goldberg & Dan Silverman & Dean Yang, 2012. "Revising Commitments: Field Evidence on the Adjustment of Prior Choices," NBER Working Papers 18065, National Bureau of Economic Research, Inc.
  3. Mark Dean & Anja Sautmann, 2014. "Credit Constraints and the Measurement of Time Preferences," Working Papers 2014-1, Brown University, Department of Economics.
  4. Fredrik Carlsson & Haoran He & Peter Martinsson & Ping Qin & Matthias Sutter, 2010. "Household Decision Making in Rural China: Using Experiments to Estimate the Influences of Spouses," Working Papers 2010-20, Faculty of Economics and Statistics, University of Innsbruck.
  5. Yang, Xiaojun & Carlsson, Fredrik, 2012. "Intra-household decisions making on intertemporal choices: An experimental study in rural China," Working Papers in Economics 537, University of Gothenburg, Department of Economics.

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