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Time Preference and Its Relationship with Age, Health, and Survival Probability

  • Li-Wei Chao

    ()

    (Population Studies Department, University of Pennsylvania)

  • Helena Szrek

    ()

    (CETE, Faculdade de Economia, Universidade do Porto)

  • Nuno Sousa Pereira

    ()

    (CETE, Faculdade de Economia, Universidade do Porto)

  • Mark V. Pauly

    ()

    (Health Care Systems Department, The Wharton School, University of Pennsylvania)

Although theories from economics and evolutionary biology predict that one’s age, health, and survival probability should be associated with one’s subjective discount rate (SDR), few studies have empirically tested for these links. Our study analyzes in detail how the SDR is related to age, health, and survival probability, by surveying a sample of individuals in townships around Durban, South Africa. In contrast to previous studies, we find that age is not significantly related to the SDR, but both physical health and survival expectations have a U-shaped relationship with the SDR. Individuals in very poor health have high discount rates, and those in very good health also have high discount rates. Similarly, those with expected survival probability on the extremes have high discount rates. Therefore, health and survival probability, and not age, seem to be predictors of one’s SDR in an area of the world with high morbidity and mortality.

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File URL: http://www.fep.up.pt/investigacao/cete/papers/DP0706.pdf
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Paper provided by Universidade do Porto, Faculdade de Economia do Porto in its series CEF.UP Working Papers with number 0706.

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Length: 37 pages
Date of creation: May 2007
Date of revision:
Handle: RePEc:por:cetedp:0706
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