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Direct Measures of Time Preference

  • Luigi Ventura

    (Universita di Roma “La Sapienza”)

This work constitutes an attempt to estimate time preference factors in a direct way from survey data, without relying on consumption data and on particular estimation techniques. By using microeconomic data obtained from the Bank of Italy Survey of Household Income and Wealth (for the year 2000) and a simple second order Taylor expansion of a generic utility function we will compute, for each agent, a utility discount factor. The interesting features of the dataset will also enable us to relate discount factors to a large number of social, economic, and demographic variables. Agents do appear to discount future utility flows at rates which vary across age, education, civil status, income and wealth situations; more importantly, it is suggested that risk and market incompleteness should be considered as important determinants of time preference parameters.

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Article provided by Economic and Social Studies in its journal Economic and Social Review.

Volume (Year): 34 (2003)
Issue (Month): 3 ()
Pages: 293–310

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Handle: RePEc:eso:journl:v:34:y:2003:i:3:p:293-310
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  1. Rogers, Alan R, 1994. "Evolution of Time Preference by Natural Selection," American Economic Review, American Economic Association, vol. 84(3), pages 460-81, June.
  2. Anderhub, Vital & Gneezy, Uri & Güth, Werner & Sonsino, Doron, 1999. "On the interaction of risk and time preferences: An experimental study," SFB 373 Discussion Papers 1999,65, Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes.
  3. Drazen Prelec & George Loewenstein, 1991. "Decision Making Over Time and Under Uncertainty: A Common Approach," Management Science, INFORMS, vol. 37(7), pages 770-786, July.
  4. Lawrance, Emily C, 1991. "Poverty and the Rate of Time Preference: Evidence from Panel Data," Journal of Political Economy, University of Chicago Press, vol. 99(1), pages 54-77, February.
  5. Christopher D Carroll, 1997. "Death to the Log-Linearized Consumption euler Equation! (And Very Poor Health to the Second-Order Approximation)," Economics Working Paper Archive 390, The Johns Hopkins University,Department of Economics.
  6. Attanasio, Orazio P, et al, 1999. "Humps and Bumps in Lifetime Consumption," Journal of Business & Economic Statistics, American Statistical Association, vol. 17(1), pages 22-35, January.
  7. Posner, Richard A., 1995. "Aging and Old Age," University of Chicago Press Economics Books, University of Chicago Press, edition 1, number 9780226675664.
  8. Keren, Gideon & Roelofsma, Peter, 1995. "Immediacy and Certainty in Intertemporal Choice," Organizational Behavior and Human Decision Processes, Elsevier, vol. 63(3), pages 287-297, September.
  9. Shane Frederick & George Loewenstein & Ted O'Donoghue, 2002. "Time Discounting and Time Preference: A Critical Review," Journal of Economic Literature, American Economic Association, vol. 40(2), pages 351-401, June.
  10. Martin Browning & Annamaria Lusardi, 1995. "Household Saving: Micro Theories and Micro Facts," Department of Economics Working Papers 1995-02, McMaster University.
  11. Sydney Ludvigson & Christina H. Paxson, 1999. "Approximation Bias in Linearized Euler Equations," NBER Technical Working Papers 0236, National Bureau of Economic Research, Inc.
  12. repec:tpr:qjecon:v:112:y:1997:i:3:p:729-58 is not listed on IDEAS
  13. Trostel, Philip A & Taylor, Grant A, 2001. "A Theory of Time Preference," Economic Inquiry, Western Economic Association International, vol. 39(3), pages 379-95, July.
  14. Hansson, Ingemar & Stuart, Charles, 1990. "Malthusian Selection of Preferences," American Economic Review, American Economic Association, vol. 80(3), pages 529-44, June.
  15. Joseph Eisenhauer & Luigi Ventura, 2003. "Survey measures of risk aversion and prudence," Applied Economics, Taylor & Francis Journals, vol. 35(13), pages 1477-1484.
  16. Cropper, Maureen L & Aydede, Sema K & Portney, Paul R, 1994. "Preferences for Life Saving Programs: How the Public Discounts Time and Age," Journal of Risk and Uncertainty, Springer, vol. 8(3), pages 243-65, May.
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