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Present-Biased Preferences and Credit Card Borrowing

  • Meier, Stephan


    (Columbia University)

  • Sprenger, Charles


    (Stanford University)

Some individuals borrow extensively on their credit cards. This paper tests whether present-biased time preferences correlate with credit card borrowing. In a field study, we elicit individual time preferences with incentivized choice experiments, and match resulting time preference measures to individual credit reports and annual tax returns. The results indicate that present-biased individuals are more likely to have credit card debt, and have significantly higher amounts of credit card debt, controlling for disposable income, other socio-demographics, and credit constraints.

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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 4198.

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Length: 38 pages
Date of creation: May 2009
Date of revision:
Publication status: published in: American Economic Journal: Applied Economics, 2010, 2 (1), 193-210
Handle: RePEc:iza:izadps:dp4198
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