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Do Discount Rates Change over Time? Experimental Evidence from Ethiopia

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  • klemick, Heather
  • Yesuf, Mahmud

Abstract

This study tests the hyperbolic discounting hypothesis using real-payoff experiments in Ethiopia. We compared time preferences over cash and consumption goods and over different time horizons. We found that participants made consistent choices over time and that responses did not vary across payment type. However, participants offered an immediate payment option first selected the impatient reward more often than those offered a delayed payment initially. Participants with greater livestock wealth and smaller landholdings were more likely to select the patient reward.

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Bibliographic Info

Paper provided by Resources For the Future in its series Discussion Papers with number dp-08-06-efd.

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Date of creation: 07 Mar 2008
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Handle: RePEc:rff:dpaper:dp-08-06-efd

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Related research

Keywords: Field experiment; hyperbolic discounting; intertemporal choice;

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References

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  1. Glenn Harrison & John List & Charles Towe, 2004. "Naturally occurring preferences and exogenous laboratory experiments: A case study of risk aversion," Framed Field Experiments 00155, The Field Experiments Website.
  2. Nava Ashraf & Dean S. Karlan & Wesley Yin, 2005. "Tying Odysseus to the Mast: Evidence from a Commitment Savings Product in the Philippines," Working Papers 917, Economic Growth Center, Yale University.
  3. Glenn W. Harrison & John A. List, 2004. "Field Experiments," Journal of Economic Literature, American Economic Association, vol. 42(4), pages 1009-1055, December.
  4. Godoy, R. & Kirby, K. & Wilkie, D., 2001. "Tenure security, private time preference, and use of natural resources among lowland Bolivian Amerindians," Ecological Economics, Elsevier, vol. 38(1), pages 105-118, July.
  5. Marc Jacobson & Joel De Castro & Vianca Aliaga & Julio Romero & MAllison Davis, 1998. "The Role of Tenure Security and Private Time Preference in Neotropical Deforestation," Land Economics, University of Wisconsin Press, vol. 74(2), pages 162-170.
  6. Donald Green & Karen Jacowitz & Daniel Kahneman & Daniel McFadden, 1995. "Referendum Contingent Valuation, Anchoring, and Willingness to Pay for Public Goods," Working Papers _010, University of California at Berkeley, Econometrics Laboratory Software Archive.
  7. Pender, John L., 1996. "Discount rates and credit markets: Theory and evidence from rural india," Journal of Development Economics, Elsevier, vol. 50(2), pages 257-296, August.
  8. Holden, Stein T. & Shiferaw, Bekele & Wik, Mette, 1998. "Poverty, market imperfections and time preferences: of relevance for environmental policy?," Environment and Development Economics, Cambridge University Press, vol. 3(01), pages 105-130, February.
  9. Steven D. Levitt & John A. List, 2007. "What Do Laboratory Experiments Measuring Social Preferences Reveal About the Real World?," Journal of Economic Perspectives, American Economic Association, vol. 21(2), pages 153-174, Spring.
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Cited by:
  1. Beyene, Abebe D. & Bezabih, Mintewab & Gebreegziabher, Zenebe, 2012. "Contract Duration under Incomplete Land Ownership Rights: Empirical Evidence from Rural Ethiopia," Discussion Papers dp-12-09-efd, Resources For the Future.
  2. Ubfal, Diego, 2012. "How General Are Time Preferences? Eliciting Good-Specific Discount Rates," IZA Discussion Papers 6774, Institute for the Study of Labor (IZA).

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