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Measuring Time Preferences

Author

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  • Jonathan Cohen
  • Keith Marzilli Ericson
  • David Laibson
  • John Myles White

Abstract

We review research that measures time preferences—i.e., preferences over intertemporal trade-offs. We distinguish between studies using financial flows, which we call "money earlier or later" (MEL) decisions, and studies that use time-dated consumption/effort. Under different structural models, we show how to translate what MEL experiments directly measure (required rates of return for financial flows) into a discount function over utils. We summarize empirical regularities found in MEL studies and the predictive power of those studies. We explain why MEL choices are driven in part by some factors that are distinct from underlying time preferences.

Suggested Citation

  • Jonathan Cohen & Keith Marzilli Ericson & David Laibson & John Myles White, 2020. "Measuring Time Preferences," Journal of Economic Literature, American Economic Association, vol. 58(2), pages 299-347, June.
  • Handle: RePEc:aea:jeclit:v:58:y:2020:i:2:p:299-347
    DOI: 10.1257/jel.20191074
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    JEL classification:

    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • D15 - Microeconomics - - Household Behavior - - - Intertemporal Household Choice; Life Cycle Models and Saving

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