Hyperbolic discounting and uniform savings floors
AbstractPrevious research suggests that, in partial equilibrium, individuals whose decision-making exhibits a present-bias--such as hyperbolic discounters who tend to over-consume--will be in favor of having a floor imposed on their savings. In this paper, I show it is quite difficult for the introduction of a savings floor to be Pareto-improving in general equilibrium. Indeed, a necessary condition for the floor to be Pareto-improving is that it is high enough to be binding for all individuals. Even in that case, because the equilibrium interest rate is affected by the level of the savings floor, some individuals may prefer to commit to a future time path of consumption by facing a high interest rate (and no floor) rather than a high floor.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Board of Governors of the Federal Reserve System (U.S.) in its series Finance and Economics Discussion Series with number 2007-59.
Date of creation: 2007
Date of revision:
Other versions of this item:
- E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
- H0 - Public Economics - - General
- H4 - Public Economics - - Publicly Provided Goods
- H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-01-05 (All new papers)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- David I. Laibson & Andrea Repetto & Jeremy Tobacman, 1998. "Self-Control and Saving for Retirement," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 29(1), pages 91-196.
- Malin, Benjamin A., 2008.
"Hyperbolic discounting and uniform savings floors,"
Journal of Public Economics,
Elsevier, vol. 92(10-11), pages 1986-2002, October.
- Benjamin A. Malin, 2005. "Hyperbolic Discounting and Uniform Savings Floor," Discussion Papers 04-034, Stanford Institute for Economic Policy Research.
- Benjamin A. Malin, 2007. "Hyperbolic discounting and uniform savings floors," Finance and Economics Discussion Series 2007-59, Board of Governors of the Federal Reserve System (U.S.).
- Steven F. Venti & David A. Wise, 2000.
"Choice, Chance, and Wealth Dispersion at Retirement,"
NBER Working Papers
7521, National Bureau of Economic Research, Inc.
- Steven F. Venti & David A. Wise, 2001. "Choice, Chance, and Wealth Dispersion at Retirement," NBER Chapters, in: Aging Issues in the United States and Japan, pages 25-64 National Bureau of Economic Research, Inc.
- B. Douglas Bernheim, 1999.
"Taxation and Saving,"
NBER Working Papers
7061, National Bureau of Economic Research, Inc.
- Laibson, David I., 1997.
"Golden Eggs and Hyperbolic Discounting,"
4481499, Harvard University Department of Economics.
- John Ameriks & Andrew Caplin & John Leahy & Tom Tyler, 2004. "Measuring Self-Control," NBER Working Papers 10514, National Bureau of Economic Research, Inc.
- Manuel Amador & George-Marios Angeletos & Ivan Werning, 2004.
"Commitment vs. Flexibility,"
2004 Meeting Papers
87, Society for Economic Dynamics.
- Sumit Agarwal & Souphala Chomsisengphet & Chunlin Liu & Nicholas S. Souleles, 2006. "Do consumers choose the right credit contracts?," Working Paper Series WP-06-11, Federal Reserve Bank of Chicago.
- Agarwal, Sumit & Chomsisengphet, Souphala & Liu, Chunlin & Souleles, Nicholas S., 2005. "Do consumers choose the right credit contracts?," CFS Working Paper Series 2005/32, Center for Financial Studies (CFS).
- Benjamin A. Malin, 2005.
"Hyperbolic Discounting and Uniform Savings Floor,"
04-034, Stanford Institute for Economic Policy Research.
- Nakajima, Makoto, 2013. "A tale of two commitments: equilibrium default and temptation," Working Papers 14-1, Federal Reserve Bank of Philadelphia.
- Makoto Nakajima, 2012.
"Rising indebtedness and temptation: A welfare analysis,"
Econometric Society, vol. 3(2), pages 257-288, 07.
- Makoto Nakajima, 2011. "Rising indebtedness and temptation: a welfare analysis," Working Papers 11-39, Federal Reserve Bank of Philadelphia.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Kris Vajs).
If references are entirely missing, you can add them using this form.