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Stability of Time Preferences

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Author Info

  • Meier, Stephan

    () (Columbia University)

  • Sprenger, Charles

    () (University of California, San Diego)

Abstract

Individuals frequently face intertemporal decisions. For the purposes of economic analysis, the preference parameters assumed to govern these decisions are generally considered to be stable economic primitives. However, evidence on the stability of time preferences is notably lacking. In a large field study conducted over two years with about 1,400 individuals, time preferences are elicited using incentivized choice experiments. The aggregate distributions of discount factors and the proportion of present-biased individuals are found to be unchanged over the two years. At the individual level, the one year correlations in measured time preference parameters are found to be high by existing standards, though some individuals change their intertemporal choices potentially indicating unstable preferences. By linking time preference measures to tax return data, we show that identified instability is uncorrelated with socio-demographics and changes to income, future liquidity, employment and family composition.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 4756.

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Length: 44 pages
Date of creation: Feb 2010
Date of revision:
Handle: RePEc:iza:izadps:dp4756

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Related research

Keywords: experimental economics; time preferences; preference stability;

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References

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Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. IZA Paper: Stability of Time Preferences
    by Liam Delaney in Geary Behaviour Centre on 2011-02-28 01:19:00
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Cited by:
  1. Markus Sass & Joachim Weimann, 2012. "The Dynamics of Individual Preferences in Repeated Public Good Experiments," FEMM Working Papers 120002, Otto-von-Guericke University Magdeburg, Faculty of Economics and Management.
  2. Uschi Backes-Gellner & Yvonne Oswald, 2012. "Learning for a bonus: How financial incentives interact with preferences," Economics of Education Working Paper Series 0079, University of Zurich, Institute for Strategy and Business Economics (ISU).
  3. Kristopher Gerardi & Lorenz Goette & Stephan Meier, 2010. "Financial literacy and subprime mortgage delinquency: evidence from a survey matched to administrative data," Working Paper 2010-10, Federal Reserve Bank of Atlanta.
  4. Courtemanche, Charles & McAlvanah, Patrick & Heutel, Garth, 2011. "Impatience, Incentives, and Obesity," Working Papers 11-9, University of North Carolina at Greensboro, Department of Economics, revised 28 Sep 2011.

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