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Patience and the Wealth of Nations

Author

Listed:
  • Thomas Dohmen

    (Universität Bonn)

  • Benjamin Enke

    (University of Bonn)

  • Armin Falk

    (Universität Bonn)

  • David Huffman

    (University of Pittsburgh)

  • Uwe Sunde

    (University of Munich)

Abstract

According to standard dynamic choice theories, patience is a key driving factor behind the accumulation of the proximate determinants of economic development. Using a novel representative data set on time preferences from 80,000 individuals in 76 countries, we investigate the empirical relevance of this hypothesis in the context of a development accounting framework. We find a significant reduced-form relationship between patience and development in terms of contemporary income as well as medium- and long-run growth rates, with patience explaining a substantial fraction of development differences across countries. Consistent with the idea that patience affects national income through accumulation processes, patience also strongly correlates with human and physical capital accumulation, investments into productivity, and institutional quality. Additional results show that the relationship between patience, human capital, and income extends to analyses across regions within countries, and across individuals within regions.

Suggested Citation

  • Thomas Dohmen & Benjamin Enke & Armin Falk & David Huffman & Uwe Sunde, 2016. "Patience and the Wealth of Nations," Working Papers 2016-012, Human Capital and Economic Opportunity Working Group.
    • Handle: RePEc:hka:wpaper:2016-012
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    5. Ani Harutyunyan & Omer Ozak, 2016. "Culture, Diffusion, and Economic Development," LICOS Discussion Papers 38216, LICOS - Centre for Institutions and Economic Performance, KU Leuven.
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    10. Falk, A. & Becker, A. & Dohmen, T.J. & Enke, B. & Huffman, D. & Sunde, U., 2015. "The nature and predictive power of preferences : global evidence," ROA Research Memorandum 012, Maastricht University, Research Centre for Education and the Labour Market (ROA).
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    12. Balart, Pau & Oosterveen, Matthijs & Webbink, Dinand, 2018. "Test scores, noncognitive skills and economic growth," Economics of Education Review, Elsevier, vol. 63(C), pages 134-153.
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    14. Borissov, Kirill & Bosi, Stefano & Ha-Huy, Thai & Modesto, Leonor, 2016. "Inequality and Growth: The Role of Human Capital with Heterogeneous Skills," IZA Discussion Papers 10090, Institute of Labor Economics (IZA).
    15. Guin, Benjamin, 2017. "Culture and household saving," Working Paper Series 2069, European Central Bank.
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    19. Brown, Martin & Henchoz, Caroline & Spycher, Thomas, 2017. "Culture and Financial Literacy," Working Papers on Finance 1703, University of St. Gallen, School of Finance.
    20. Korff, Alex & Steffen, Nico, 2019. "Economic preferences and trade outcomes," DICE Discussion Papers 321, Heinrich Heine University Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
    21. Mastrobuoni, Giovanni & Rivers, David A., 2016. "Criminal Discount Factors and Deterrence," IZA Discussion Papers 9769, Institute for the Study of Labor (IZA).
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    More about this item

    Keywords

    time preference; comparative development; growth; savings; human capital; physical capital; innovation; institutions;
    All these keywords.

    JEL classification:

    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • D90 - Microeconomics - - Micro-Based Behavioral Economics - - - General
    • O10 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - General

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