Hyperbolic Discounting and Uniform Savings Floor
I develop a general equilibrium model populated by agents with varying degrees of hyperbolic discounting who vote for a uniform savings floor. Although partial equilibrium intuition suggests that all individuals will prefer to have some constraint on their consumption/savings decision, I find that even the smallest amount of heterogeneity in preferences leads to very large differences in preferred policies. In fact, policy preferences are extreme: each individual either prefers having no floor imposed on the population or having a floor so high that it eliminates all borrowing and lending. I demonstrate that both endogenously determined prices and dynamically inconsistent preferences are necessary for this result. Finally, I consider how the equilibrium savings floor depends on the average amount of self-control in the population.
|Date of creation:||Aug 2005|
|Date of revision:|
|Contact details of provider:|| Postal: 366 Galvez Street, Stanford, California 94305-6015|
Phone: (650) 725-1874
Fax: (650) 723-8611
Web page: http://siepr.stanford.edu
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Laibson, David I., 1997.
"Golden Eggs and Hyperbolic Discounting,"
4481499, Harvard University Department of Economics.
- Steven F. Venti & David A. Wise, 2000.
"Choice, Chance, and Wealth Dispersion at Retirement,"
NBER Working Papers
7521, National Bureau of Economic Research, Inc.
- Steven F. Venti & David A. Wise, 2001. "Choice, Chance, and Wealth Dispersion at Retirement," NBER Chapters, in: Aging Issues in the United States and Japan, pages 25-64 National Bureau of Economic Research, Inc.
- Benjamin A. Malin, 2007.
"Hyperbolic discounting and uniform savings floors,"
Finance and Economics Discussion Series
2007-59, Board of Governors of the Federal Reserve System (U.S.).
- B. Douglas Bernheim, 1999.
"Taxation and Saving,"
99007, Stanford University, Department of Economics.
- Manuel Amador & Iván Werning & George-Marios Angeletos, 2006.
"Commitment vs. Flexibility,"
Econometric Society, vol. 74(2), pages 365-396, 03.
- Manuel Amador & George-Marios Angeletos & Ivan Werning, 2004. "Commitment vs. Flexibility," 2004 Meeting Papers 87, Society for Economic Dynamics.
- Manuel Amador & Ivan Werning & George-Marios Angeletos, 2003. "Commitment Vs. Flexibility," NBER Working Papers 10151, National Bureau of Economic Research, Inc.
- Sumit Agarwal & Souphala Chomsisengphet & Chunlin Liu & Nicholas S. Souleles, 2006.
"Do consumers choose the right credit contracts?,"
Working Paper Series
WP-06-11, Federal Reserve Bank of Chicago.
- John Ameriks & Andrew Caplin & John Leahy & Tom Tyler, 2004. "Measuring Self-Control," NBER Working Papers 10514, National Bureau of Economic Research, Inc.
- David I. Laibson & Andrea Repetto & Jeremy Tobacman, 1998. "Self-Control and Saving for Retirement," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 29(1), pages 91-196.
When requesting a correction, please mention this item's handle: RePEc:sip:dpaper:04-034. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Anne Shor)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.