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Eliciting Time Preferences When Income and Consumption Vary: Theory, Validation & Application to Job Search

Author

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  • Belot, Michèle

    (Cornell University)

  • Kircher, Philipp

    (Cornell University)

  • Muller, Paul

    (Vrije Universiteit Amsterdam)

Abstract

We propose a simple method for eliciting individual time preferences without estimating utility functions even in settings where background consumption changes over time. It relies on lottery tickets with high rewards. In a standard intertemporal choice model high rewards decouple lottery choices from variation in background consumption. We validate our elicitation method experimentally on two student samples: one asked in December when their current budget is reduced by extraordinary expenditures for Christmas gifts; the other asked in February when no such extra constraints exist. We illustrate an application of our method with unemployed job seekers which naturally have income/consumption variation.

Suggested Citation

  • Belot, Michèle & Kircher, Philipp & Muller, Paul, 2021. "Eliciting Time Preferences When Income and Consumption Vary: Theory, Validation & Application to Job Search," IZA Discussion Papers 14091, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp14091
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    References listed on IDEAS

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    More about this item

    Keywords

    time preferences; experimental elicitation; job search; hyperbolic discounting;
    All these keywords.

    JEL classification:

    • D90 - Microeconomics - - Micro-Based Behavioral Economics - - - General
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search

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