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Time Discounting and Wealth Inequality

Author

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  • Epper, Thomas

    ()

  • Fehr, Ernst
  • Fehr-Duda, Helga
  • Thustrup Kreiner, Claus
  • Dreyer Lassen, David
  • Leth-Petersen, Søren
  • Nytoft Rasmussen, Gregers

Abstract

This paper documents a large association between individuals’ time discounting in incentivized experiments and their positions in the real-life wealth distribution derived from Danish highquality administrative data for a large sample of middle-aged individuals. The association is stable over time, exists through the wealth distribution and remains large after controlling for education, income profile, school grades, initial wealth, parental wealth, credit constraints, demographics, risk preferences and additional behavioral parameters. Our results suggest that savings behavior is a driver of the observed association between patience and wealth inequality as predicted by standard savings theory.

Suggested Citation

  • Epper, Thomas & Fehr, Ernst & Fehr-Duda, Helga & Thustrup Kreiner, Claus & Dreyer Lassen, David & Leth-Petersen, Søren & Nytoft Rasmussen, Gregers, 2019. "Time Discounting and Wealth Inequality," Economics Working Paper Series 1916, University of St. Gallen, School of Economics and Political Science.
  • Handle: RePEc:usg:econwp:2019:16
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    File URL: http://ux-tauri.unisg.ch/RePEc/usg/econwp/EWP-1916.pdf
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    1. Time Discounting and Wealth Inequality
      by maximorossi in NEP-LTV blog on 2019-11-25 22:29:11

    More about this item

    Keywords

    Wealth inequality; savings behavior; time discounting; experimental methods; administrative data;

    JEL classification:

    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • D15 - Microeconomics - - Household Behavior - - - Intertemporal Household Choice; Life Cycle Models and Saving
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth

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