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The stability of measured time preferences

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  • Krupka, Erin L.
  • Stephens, Melvin

Abstract

We use a panel dataset to test the stability of measured discount rates over time in response to changes in both macroeconomic events and household-level labor market outcomes. While discount rate measures are constructed to capture a rate of time preference, our evidence is inconsistent with such an interpretation. Our results more closely align with the interpretation that standard methods to elicit discount rates reveal the market interest rate faced by an individual rather than their pure rate of time preference. It follows directly from such an interpretation that factors which influence the interest rate at which a household can borrow and lend, such as the inflation rate and household income, ought to be correlated with the elicited discount rate – a prediction supported by our data.

Suggested Citation

  • Krupka, Erin L. & Stephens, Melvin, 2013. "The stability of measured time preferences," Journal of Economic Behavior & Organization, Elsevier, vol. 85(C), pages 11-19.
  • Handle: RePEc:eee:jeborg:v:85:y:2013:i:c:p:11-19
    DOI: 10.1016/j.jebo.2012.10.010
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Shusaku Sasaki & Naoko Okuyama & Masao Ogaki & Fumio Ohtake, 2017. "Education and pro-family altruistic discrimination against foreigners: Five-country comparisons," ISER Discussion Paper 1002, Institute of Social and Economic Research, Osaka University.
    2. Golsteyn, B.H.H. & Grönqvist, H. & Lindahl, L., 2013. "Time preferences and lifetime outcomes," ROA Research Memorandum 019, Maastricht University, Research Centre for Education and the Labour Market (ROA).
    3. Koch, Alexander K. & Nafziger, Julia, 2016. "Goals and bracketing under mental accounting," Journal of Economic Theory, Elsevier, vol. 162(C), pages 305-351.
    4. C. Giannetti, 2014. "Time Preference Instability, Financial and Working Status," Working Papers wp924, Dipartimento Scienze Economiche, Universita' di Bologna.
    5. Janssens, Wendy & Kramer, Berber & Swart, Lisette, 2017. "Be patient when measuring hyperbolic discounting: Stationarity, time consistency and time invariance in a field experiment," Journal of Development Economics, Elsevier, vol. 126(C), pages 77-90.
    6. Olympia Bover & Laura Hospido & Ernesto Villanueva, "undated". "The impact of high school financial education on financial knowledge and choices: evidence from a randomized trial in Spain," Working Papers 1801, Banco de España;Working Papers Homepage.
    7. Hardardottir, Hjördis, 2016. "Long Term Stability of Time Preferences and the Role of the Macroeconomic Situation," Working Papers 2016:5, Lund University, Department of Economics, revised 29 Aug 2016.
    8. Chuang, Yating & Schechter, Laura, 2015. "Stability of experimental and survey measures of risk, time, and social preferences: A review and some new results," Journal of Development Economics, Elsevier, vol. 117(C), pages 151-170.
    9. repec:eee:joepsy:v:62:y:2017:i:c:p:17-32 is not listed on IDEAS
    10. repec:eee:joepsy:v:60:y:2017:i:c:p:53-70 is not listed on IDEAS
    11. Ubfal, Diego, 2016. "How general are time preferences? Eliciting good-specific discount rates," Journal of Development Economics, Elsevier, vol. 118(C), pages 150-170.
    12. Lindner, Florian & Rose, Julia, 2017. "No need for more time: Intertemporal allocation decisions under time pressure," Journal of Economic Psychology, Elsevier, vol. 60(C), pages 53-70.
    13. Hoel, Jessica B. & Schwab, Benjamin & Hoddinott, John, 2016. "Self-control exertion and the expression of time preference: Experimental results from Ethiopia," Journal of Economic Psychology, Elsevier, vol. 52(C), pages 136-146.
    14. Maria Paola & Francesca Gioia, 2017. "Does patience matter in marriage stability? Some evidence from Italy," Review of Economics of the Household, Springer, vol. 15(2), pages 549-577, June.

    More about this item

    Keywords

    Intertemporal choice; Household behavior; Impatience;

    JEL classification:

    • D1 - Microeconomics - - Household Behavior
    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
    • D90 - Microeconomics - - Micro-Based Behavioral Economics - - - General
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply

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