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Aggregate savings under quasi-hyperbolic versus exponential discounting

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  • Kang, Minwook

Abstract

Using a measure of patience proposed by Myerson et al. (2001) and Caliendo and Findley (2014), this paper compares aggregate savings between exponential and quasi-hyperbolic discounters in two different models of economies: (1) the economy with linear technology and stochastic productivity shock and (2) a deterministic neoclassical growth model developed by Laibson (1997). This paper shows that intertemporal elasticity of substitution and growth rates have important roles in determining equilibrium savings of the two discounters.

Suggested Citation

  • Kang, Minwook, 2021. "Aggregate savings under quasi-hyperbolic versus exponential discounting," Economics Letters, Elsevier, vol. 207(C).
    • Handle: RePEc:eee:ecolet:v:207:y:2021:i:c:s0165176521002834
    DOI: 10.1016/j.econlet.2021.110006
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    References listed on IDEAS

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    1. Larry Selden & Xiao Wei, 2016. "Changing Tastes and Effective Consistency," Economic Journal, Royal Economic Society, vol. 126(595), pages 1912-1946, September.
    2. David Laibson & Andrea Repetto & Jeremy Tobacman, 2005. "Estimating Discount Functions with Consumption Choices over the Lifecycle," Levine's Bibliography 784828000000000643, UCLA Department of Economics.
    3. Caliendo, Frank N. & Findley, T. Scott, 2014. "Discount functions and self-control problems," Economics Letters, Elsevier, vol. 122(3), pages 416-419.
    4. George-Marios Angeletos & David Laibson & Andrea Repetto & Jeremy Tobacman & Stephen Weinberg, 2001. "The Hyberbolic Consumption Model: Calibration, Simulation, and Empirical Evaluation," Journal of Economic Perspectives, American Economic Association, vol. 15(3), pages 47-68, Summer.
    5. Per Krusell & Anthony A. Smith, Jr., 2003. "Consumption--Savings Decisions with Quasi--Geometric Discounting," Econometrica, Econometric Society, vol. 71(1), pages 365-375, January.
    6. Findley, T. Scott & Caliendo, Frank N., 2014. "Interacting mechanisms of time inconsistency," Journal of Economic Psychology, Elsevier, vol. 41(C), pages 68-76.
    7. Harris, Christopher & Laibson, David, 2001. "Dynamic Choices of Hyperbolic Consumers," Econometrica, Econometric Society, vol. 69(4), pages 935-957, July.
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    9. Kirill Borissov & Mikhail Pakhnin & Ronald Wendner, 2020. "Naive Agents with Quasi-hyperbolic Discounting and Perfect Foresight," EUSP Department of Economics Working Paper Series 2020/03, European University at St. Petersburg, Department of Economics.
    10. Larry Selden, 1979. "An OCE Analysis of the Effect of Uncertainty on Saving under Risk Preference Independence," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 46(1), pages 73-82.
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    12. Kirsten I. M. Rohde, 2019. "Measuring Decreasing and Increasing Impatience," Management Science, INFORMS, vol. 65(4), pages 1700-1716, April.
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    Cited by:

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    3. Minwook Kang, 2025. "Forgiveness, cooperation, and present bias in the infinitely iterated Prisoner’s dilemma," Theory and Decision, Springer, vol. 99(3), pages 573-591, November.

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    Keywords

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    JEL classification:

    • D15 - Microeconomics - - Household Behavior - - - Intertemporal Household Choice; Life Cycle Models and Saving
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth

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