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The Age of Reason: Financial Decisions Over the Lifecycle

  • Xavier Gabaix

    (New York University)

  • John C. Driscoll

    (Federal Reserve Board)

  • David Laibson

    (Harvard University)

  • Sumit Agarwal

    (Chicago Federal Reserve Bank)

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 Society for Economic Dynamics in its series 2008 Meeting Papers with number 322.

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Date of creation: 2008
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Handle: RePEc:red:sed008:322
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