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Time preferences and political regimes: Evidence from reunified Germany

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  • Friehe, Tim
  • Pannenberg, Markus

Abstract

We use the separation and later reunification of Germany after World War II to show that a political regime shapes time preferences of its residents. Using two identification strategies, we find that former residents of the German Democratic Republic exhibit a significantly less pronounced present bias when compared to former residents of the Fed- eral Republic of Germany, whereas measures of patience are statistically indistinguishable. Interpreting the years spent under the regime as a proxy for treatment intensity yields consistent results. Moreover, we present evidence showing that present bias predicts choices in the domains of health, finance, and education, thereby illustrating lasting repercussions of a regime's in uence on time preferences.

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  • Friehe, Tim & Pannenberg, Markus, 2019. "Time preferences and political regimes: Evidence from reunified Germany," GLO Discussion Paper Series 306, Global Labor Organization (GLO).
  • Handle: RePEc:zbw:glodps:306
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    Keywords

    Time preferences; Political regime; Germany; Natural experiment; SOEP;

    JEL classification:

    • D02 - Microeconomics - - General - - - Institutions: Design, Formation, Operations, and Impact
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis

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