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The Age of Reason: Financial Decisions Over the Lifecycle

  • Sumit Agarwal
  • John C. Driscoll
  • Xavier Gabaix
  • David Laibson

In cross-sectional data sets from ten credit markets, we find that middle-aged adults borrow at lower interest rates and pay fewer fees relative to younger and older adults. Fee and interest payments are minimized around age 53. The measured effects are not explained by observed risk characteristics. We discuss several leading factors that may contribute to these effects, including age-related changes in experience and cognitive function, selection effects, and cohort effects.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 13191.

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Date of creation: Jun 2007
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Handle: RePEc:nbr:nberwo:13191
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