credit market constraints consumption smoothing and the accumulation of durable production assets in low income countries investments in bullocks in india in this paper we formulate and estimate a finite horizon structural dynamic model of agricultural investment behavior that incorporates the major features of low income agricultural environments income uncertainty constraints on borrowing and rental markets and the use of investment assets to generate income and smooth consumption the model is fit to longitudinal indian household data on farm profits bullock stocks and pump sets the estimated structural parameters are used to assess the effects on the life cycle accumulation of bullocks agricultural profits and welfare associated with complete markets and bullock liquidity and with second best policies that provide assured sources of income to farmers and weather insurance

survival of the gene intergenerational transfers and precautionary saving abstract this paper provides a model of bequest and investment in children s human capital at low incomes it posits that parents and children are linked through their common concern of grandchildren and intergenerational transfers provide a material basis for the perpetuation of the family line the model characterizes intergenerational strategic interactions in a dynamic game theoretical framework moreover it explores intergenerational uncertainty as a source of precautionary saving in contrast with the existing literature the model implies that there are qualitative differences between precautionary saving from one s own income uncertainty and precautionary bequests from children s income uncertainty

to know and to care how awareness and valuation of the future jointly shape consumer spending reducing spending in the present requires the combination of being both motivated to provide for one s future self valuing the future and actively considering long term implications of one s choices awareness of the future feeling more connected to the future self thinking that the important psychological properties that define your current self are preserved in the person you will be in the future helps motivate consumers to make far sighted choices by changing their valuation of future outcomes e g discount factors however this change only reduces spending when opportunity costs are considered correspondingly cues that highlight opportunity costs reduce spending primarily when people discount the future less or are more connected to their future selves implications for the efficacy of behavioral interventions and for research on time discounting are discussed

educational policy and the economics of the family this paper analyzes the implications of alternative ways to model decision making by families for educational policy we show that many of the policy implications associated with credit constraints cannot be distinguished from the implications of models of the family that differ from the conventional barro becker model we then argue that it is the combination of credit constraints and non conventional preferences that provides a robust basis for government intervention to promote educational investment

transitional dynamics and the distribution of wealth in a neoclassical growth model abstract the evolution of the personal distribution of wealth in a standard neoclassical growth model is studied if the economy is growing toward the steady state and preferences are such that marginal utility from consumption is infinite finite at some all positive non negative consumption level s then the average saving propensity of agents is positively negatively related to their wealth if the economy is decaying toward the steady state these relationships are reversed if wealth and average saving propensity are positively negatively related the distribution of current period wealth lorenz dominates is lorenz dominated by next period s distribution of wealth

markov perfect equilibria in intergenerational games with consistent preferences abstract this paper considers the subgame perfect equilibria in markov strategies of an abstract intergenerational game in which the generations preferences are consistent in the sense that they admit recursive aggregators given biconvergence i show that such equilibria exist and are equivalent both to the solutions of bellman s recursive optimality equations and to the optima of the first generation s utility function these results are then applied to a simple model casting new light on the neutrality of government debt and to another accommodating impure altruism finally two new examples crisply illustrate how the paper s equivalences fail when biconvergence fails

anomalies in intertemporal choice evidence and an interpretation research on decision making under uncertainly has been strongly influenced by the documentation of numerous expected utility eu anomalies behaviors that violate the expected utility axioms the relative lack of progress on the closely related topic of intertemporal choice is partly due to the absence of an analogous set of discounted utility du anomalies we enumerate a set of du anomalies analogous to the eu anomalies and propose a model that accounts for the anomalies as well as other intertemporal choice phenomena incompatible with du we discuss implications for savings behavior estimation of discount rates and choice framing effects

markov perfect equilibria in altruistic growth economies with production uncertainty this paper concerns the existence of markov perfect equilibria in altruistic growth economies previous work on deterministic models has established existence only under extremely restrictive conditions we show that the introduction of production uncertainly yields an existence theorem for aggregative infinite horizon models with very general forms of altruism journal of economic literature classification numbers

economic growth with intergenerational altruism in this paper we study the properties of equilibria in an aggregative growth model with intergenerational altruism in this model each generation is active for a single period at the beginning of this period it receives an endowment of a single homogeneous good which is the output from a bequest investment made by the previous generation it divides the endowment between consumption and investment the return from this investment constitutes the endowment of the next generation each generation derives utility from its own consumption and that of its immediate successor however since altruism is limited in the sense that no generation cares about later successors the interests of distinct agents come into conflict models of this type have been used to analyze a number of issues concerning intergenerational altruism one line of research pursued by arrow 1973 and dasgupta 1974a elucidates the implications of rawls principle of just savings others beginning with phelps and pollak 1968 have addressed the question of how an altruistic growth economy might actually evolve over time topics of subsequent investigation have included the efficiency and optimality of equilibrium programs and the implications of intergenerational altruism for the distribution of wealth unfortunately the positive features of equilibrium programs have received little attention from previous authors aside from a few comments by kohlberg 1976 virtually nothing is known about the asymptotic behaviour of capital stocks in these models in particular will the long run capital stock which arises from intergenerational conflict be higher or lower than the turnpike associated with the solution to the optimal planning problem on a priori grounds the answer is not clear agents who take only a limited interest in the future will tend to bequeath less than those who are far sighted however since each generation views its children s bequest as pure waste it must bequeath a larger sum to obtain the same consumption value in this paper we obtain steady state results for equilibrium capital stocks completely analogous to the well known optimal planning results by comparing steady states we

opportunity cost consideration normatively consumers should incorporate opportunity costs into every decision they make yet behavioral research suggests that consumers consider them rarely if at all this research addresses when consumers consider opportunity costs who considers opportunity costs which opportunity costs spontaneously spring to mind and what the consequences of considering opportunity costs are perceived constraints cue consumers to consider opportunity costs and consumers high in propensity to plan consider opportunity costs even when not cued by immediate constraints the specific alternatives retrieved and the likelihood of retrieval are functions of category structures in memory for a given resource some uses are more typical of the category of possible uses and so are more likely to be considered as opportunity costs consumers who consider opportunity costs are less likely to buy focal options than those who do not when opportunity costs are appealing but no less likely when opportunity costs are unappe

measuring the impact of promotions on brand switching when consumers are forward looking abstract logit choice models have been used extensively to study promotion response this article examines whether brand switching elasticities derived from these models are overestimated as a result of rational consumer adjustment of purchase timing to coincide with promotion schedules and whether a dynamic structural model can address this bias using simulated data the authors first show that if the structural model is correct brand switching elasticities are overestimated by stand alone logit models a nested logit model improves the estimates but not completely second the authors estimate the models on real data the results indicate that the structural model fits better and produces sensible coefficient estimates the authors then observe the same pattern in switching elasticities as they do in the simulation third the authors predict sales assuming a 50 increase in promotion frequency the reduced form models predict much higher sales levels than does the dynamic structural model the autho

opportunity cost neglect to properly consider the opportunity costs of a purchase consumers must actively generate the alternatives that it would displace the current research suggests that consumers often fail to do so even under conditions promoting cognitive effort various cues to consider opportunity costs reduce purchase rates and increase the choice share of more affordable options sensitivity to such cues varies with chronic dispositional differences in spending attitudes we discuss the implications of these results for the marketing strategies of economy and premium brands

a strategic analysis of global warming theory and some numbers we model the global warming process as a dynamic commons game in which the players are countries their actions at each date produce emissions of greenhouse gases and the state variable is the current stock of greenhouse gases the theoretical analysis is complemented by a calibration exercise the first set of results establishes theoretically and then with illustrative numbers the over emissions due to a tragedy of the commons the power of simple sanctions to lower emissions and increase welfare is then examined as is the effect of cost asymmetry finally a complete theoretical charactrization is provided for the best equilibrium and it is shown that it has a very simple structure it involves a constant emission rate through time

macroeconomic dynamics in a multi country economy a dynamic optimization approach using a multicountry model with perfect foresight dynamic optimization by infinitely lived households the authors analyze the dynamics of macroeconomic nonmonetary and monetary variables the authors show that the most patient country initially accumulates foreign debt but eventually decumulates this debt and becomes a creditor it monotonically increases its consumption and experiences monotonic price and exchange rate appreciation the moderately patient country initially accumulates foreign assets but eventually decumulates them and becomes a debtor its consumption also follows a humped path the least patient country monotonically decumulates foreign assets lowers its consumption and experiences rising inflation and exchange rate depreciation copyright 1992 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

rawlsian intergenerational justice as a markov perfect equilibrium in a resource technology the rawlsian maximin criterion is combined with nonpaternalistic altruistic preferences in a nonrenewable resource technology the maximin programme is shown to be time inconsistent for a subset of initial conditions a solution to this intergenerational conflict is found under a given assumption as a generically unique subgame perfect equilibrium

time patience and specialization patterns in the presence of asset trade specialization patterns in an open economy two sector growth model with endogenous capital accumulation are examined in the presence of free international lending and borrowing without free international lending and borrowing it is known that whereas the less time patient country decumulates real capital the more patient country accumulates real capital and eventually specializes in a capital intensive industry however free trade of international financial assets causes a dramatic change in long run specialization patterns in this case the less patient country may well specialize in the capital intensive industry and the more patient country in the labor intensive industry

a generalizable scale of propensity to plan the long and the short of planning for time and for money planning has pronounced effects on consumer behavior and intertemporal choice we develop a six item scale measuring individual differences in propensity to plan that can be adapted to different domains and used to compare planning across domains and time horizons adaptations tailored to planning time and money in the short run and long run each show strong evidence of reliability and validity we find that propensity to plan is moderately domain specific scale measures and actual planning measures show that for time people plan much more for the short run than the long run for money short and long run planning differ less time and money adaptations of our scale exhibit sharp differences in nomological correlates short run and long run adaptations differ less domain specific adaptations predict frequency of actual planning in their respective domains a very long run money adaptation predicts fico credit scores low planners thus face materially higher cost of credit

intertemporal complementarity and optimality a study of a two dimensional dynamical system the theory of optimal intertemporal allocation has been developed primarily for the case in which the objective function of the planner or representative agent can be written as u c1 c2 ldots equiv sum infty t 1 delta t 1 w c t where c t represents consumption at date t w the period felicity function and delta epsilon o 1 a discount factor representing the time preference of the agent

wealth varying intertemporal elasticities of substitution evidence from panel and aggregate data abstract this paper constructs and estimates a model of consumer preferences in which the intertemporal elasticity of substitution ies of consumption expenditure rises with the level of wealth the purpose of this paper is to measure the effect that systematic variation in the ies of poor and rich consumers has on the ies of aggregate consumption expenditure we find economically significant differences in the ies of poor and rich consumers in indian panel data on the consumption of individual households we also find economically significant differences in the ies measured in aggregate time series data for the u s and india

consistent climate policies what are the optimal climate policies when time preferences deviate from the standard exponential discounting and decision makers cannot commit to future policies we show that with time declining discounting the delay and persistence of climate impacts provide a commitment device to policy makers we quantify the commitment value in a climate economy model by solving time consistent markov equilibrium capital and emission taxes explicitly the returns on capital and climate investments are no longer equal leading to a large increase in the emission tax compared to a benchmark with equalized returns the commitment value increases the tax by a factor of 20 in our quantitative assessment

dynamic allocation in an altruistic overlapping generations economy abstract this paper is concerned with the issue does there exist a social security program which can be maintained period after period to address this issue the paper considers dynamic allocation in an altruistic overlapping generations economy the altruism is intergenerational nonpaternalistic and two sided it is assumed that generations coexisting in the same period agree on a social welfare function which evaluates the consumption of various generations and play a game against those living in different periods a perfect equilibrium of this game is shown to exist and its properties are examined journal of economic literature classification numbers c72 d62 h55

rate of time preference intertemporal elasticity of substitution and level of wealth the rate of time preference rtp and the intertemporal elasticity of substitution ies are two important factors shaping intertemporal consumption decisions models in which the rtp and or the ies differ systematically between rich and poor households have different empirical and policy implications for economic development growth and the distribution of income and consumption from those of standard models in which these parameters are constant across households in this chapter we estimate a model in which both rtp and ies are allowed to differ across rich and poor households using household level panel data from india our empirical results are consistent with the view that the rtp is constant across poor and rich households but the ies is larger for the rich than it is for the poor

decreasing relative risk aversion risk sharing and the permanent income hypothesis this article develops a method for testing the risk sharing hypothesis rsh against various versions of the permanent income hypothesis pih while allowing for heterogeneity in risk preferences across households using 1 year and longer differences in household total nondurable consumption data from indian villages we find evidence that favors the rsh over the pih at the village level

utility over time the homothetic case the purpose of this paper is to show how the economics of choice over time can be strengthened by introduction of restrictive assumptions namely additivity and homotheticity of utility we consider applications to labor supply 2 savings behavior and long run distribution and welfare measurement labor supply is mainly a function of the ratio of non labor income to the wage rate savings generally increase with increases in the rate of interest in the long run distribution is not much dependent upon initial wealth and instead is mainly determined by attitudes towards time in the long run the as if social utility function is often well measured by consumer surplus the applications appear to be strong therefore it is appropriate to begin with a general argument for the main assumptions to be imposed two early contributions to the economics of time are by becker 1 and koopmans 111 the former presents a general framework without any specific assumptions about utility over time at most there is a homogeneous technology to produce consumption from goods and time pollak and wachter 131 koopmans 1 l adds highly intuitive assumptions to show utility additive and discounted over time koopmans analysis could be extended to cases where utility is additive merely between remote time periods see rader 15 pp 161 1851 this would correspond to the realistic case where the influence of distant consumption on preferences is negligible additivity must be reinterpreted in terms of a shifting environment of current consumption plus consumption sufficiently contiguous in time the analysis following could be adapted to this most compelling case merely adding utility over time does have implications for demand for example if complementaries occur between two goods they must occur between many others e g 15 pp 228 2331 however the results are meager and insufficient for the kind of analysis economists generally want to apply therefore we are led to add the assumption of homotheticity namely 219 0022 0531 81 050219 18 02 00 o

consumption savings decisions with quasi geometric discounting we study the consumption savings problem of an infinitely lived rational consumer who has time inconsistent preferences in the form of quasi geometric discounting the consumer operates a weakly concave production function and must simply divide current resources into current consumption and savings there is no uncertainty a solution to the consumer s problem is a subgame perfect equilibrium of a dynamic game between the consumer s successive selves we show that this game has a continuum of equilibria in stationary markov strategies not only is the stationary point of the consumer s asset holdings indeterminate but each stationary point has a continuum of dynamic paths converging to it the savings policy rules underlying these dynamic paths are step functions

intergenerational altruism with future bias abstract we show that standard preferences of altruistic overlapping generations exhibit future bias which involves preference reversals associated with increasing impatience this underlies a conflict of interest between successive generations we explore the implications of this conflict for intergenerational redistribution when there is a sequence of utilitarian governments representing living generations and choosing policies independently over time we argue that future bias creates incentives to legislate and sustain a pay as you go pension system which every government views as a self enforcing commitment mechanism to increase future old age transfers

discounting time and time discounting subjective time perception and intertemporal preferences abstract consumers often make decisions about outcomes and events that occur over time this research examines consumers sensitivity to the prospective duration relevant to their decisions and the implications of such sensitivity for intertemporal trade offs especially the degree of present bias i e hyperbolic discounting the authors show that participants subjective perceptions of prospective duration are not sufficiently sensitive to changes in objective duration and are nonlinear and concave in objective time consistent with psychophysical principles more important this lack of sensitivity can explain hyperbolic discounting the results replicate standard hyperbolic discounting effects with respect to objective time but show a relatively constant rate of discounting with respect to subjective time perceptions the results are replicated between subjects experiment 1 and within subjects experiments 2 with multiple time horizons and multiple descriptors and with different measurement ord

decreasing relative risk aversion and tests of risk sharing the relative risk aversion rra coefficient of a household whose consumption is close to the subsistence level may be very high for example if consumption is exactly at the subsistence level the household may not be willing to bear any risk if this is the case then the rra coefficient must be a decreasing function of wealth for poor households therefore we should allow the possibility of decreasing rra drra in testing the full risk sharing hypothesis however existing tests in the empirical literature are derived using preferences that exhibit either increasing or constant rra even when they are applied to data containing low income households we therefore use a hyperbolic absolute risk aversion hara utility which implies increasing constant and decreasing rra as special cases to test full risk sharing hypothesis using the international food policy research institute ifpri and the international crops research institute of the semi arid tropics icrisat household level data sets we find evidence in support of the drra hypothesis along with evidence favoring full risk sharing hypothesis at the village level and evidence against the hypothesis at the inter village level when rra is restricted to be constant we replicate the previous results in the literature reject the full risk sharing hypothesis at both levels our tests however reject this restriction and favor drra in almost all cases these results suggest that it is important to allow for drra in testing the full risk sharing hypothesis when data containing low income households are investigated this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this this abstract was borrowed from another version of this item

on intertemporal selfishness how the perceived instability of identity underlies impatient consumption how does the anticipated connectedness between one s current and future identity help explain impatience in intertemporal preferences the less consumers are closely connected psychologically to their future selves the less willing they will be to forgo immediate benefits in order to ensure larger deferred benefits to be received by that future self when consumers measured or manipulated sense of continuity with their future selves is lower they accept smaller sooner rewards wait less in order to save money on a purchase require a larger premium to delay receiving a gift card and have lower long term discount rates

tying odysseus to the mast evidence from a commitment savings product in the philippines we designed a commitment savings product for a philippine bank and implemented it using a randomized control methodology the savings product was intended for individuals who want to commit now to restrict access to their savings and who were sophisticated enough to engage in such a mechanism we conducted a baseline survey on 1777 existing or former clients of a bank one month later we offered the commitment product to a randomly chosen subset of 710 clients 202 28 4 percent accepted the offer and opened the account in the baseline survey we asked hypothetical time discounting questions women who exhibited a lower discount rate for future relative to current trade offs and hence potentially have a preference for commitment were indeed significantly more likely to open the commitment savings account after twelve months average savings balances increased by 81 percentage points for those clients assigned to the treatment group relative to those assigned to the control group we conclude that the savings response represents a lasting change in savings and not merely a short term response to a new product

determining consumers discount rates with field studies abstract because utility profits state transitions and discount rates are confounded in dynamic models discount rates are typically fixed for the purpose of identification the authors propose a strategy of identifying discount rates the identification rests on imputing the utility profits using decisions made in a context in which the future is inconsequential the objective function is concave and the decision space is continuous they then use these utilities profits to identify discount rates in contexts in which dynamics become material the authors exemplify this strategy using a field study in which cell phone users transitioned from a linear to a three part tariff pricing plan they find that the estimated discount rate corresponds to a weekly discount factor 90 lower than the value typically assumed in empirical research 995 when using a standard 995 discount factor they find that the price coefficient is underestimated by 16 moreover the predicted intertemporal substitution pat

the effect of future event markers on intertemporal choice is moderated by the reliance on emotions versus reason to make decisions this research examines how future event markers influence intertemporal choice and it demonstrates across five studies that the number of salient events between a smaller sooner and larger later option impacts patience the direction of the effect depends on whether the individual relies on emotion versus reason to make decisions for those who rely on emotion additional events increase patience conversely for individuals who rely on reason additional events decrease patience these effects are driven by perceptions of time as events contract perceptions of time for emotional decision makers but expand perceptions of time for rational decision makers implications arise for intertemporal choice time perception and emotional versus rational decision making

economic development and time preference schedule the case of japan and east asian nics the constancy of the time preference rate has been a traditional assumption of the literature on intertemporal choice of consumers this chapter examines empirically the validity of the constancy hypothesis of the time preference schedule three alternative hypotheses concerning the time preference rate are investigated the first hypothesis posits that the time preference rate decreases as the economy develops fisher hypothesis the second hypothesis posits that the time preference rate increases as the economy develops uzawa hypothesis the third hypothesis which is a combination of the second and third hypotheses posits that as a nation develops the time preference rate decreases up to a certain point and thereafter the time preference rate increases fukao hamada hypothesis post war annual time series data from taiwan japan and korea are employed to examine these hypotheses i find that the fukao hamada hypothesis is supported for taiwan and japan while the time preference rate is constant for korea

the value of nothing asymmetric attention to opportunity costs drives intertemporal decision making this paper proposes a novel account of impatience people pay more attention to the opportunity costs of choosing larger later rewards than to the opportunity costs of choosing smaller sooner ones eight studies show that when the opportunity costs of choosing smaller sooner rewards are subtly highlighted people become more patient whereas when the opportunity costs of choosing larger later rewards are highlighted this has no effect this pattern is robust to variations in the choice task to the participant population and to whether the choices are incentivized or hypothetical we argue that people are naturally aware of the opportunity costs of delayed rewards but pay less attention to those associated with smaller sooner ones we conclude by discussing implications for theory and policy data as supplemental material are available at https doi org 10 1287 mnsc 2016 2547 this paper was accepted by yuval rottenstreich judgment and decision making

intergenerational transfers and demographic transition abstract this paper presents an analysis of demographic transition based on the endogenous evolution of intergenerational transfers along an economy s endogenous path of development two period lived agents belonging to overlapping generations choose optimally their desired levels of consumption and fertility together with their desired sizes of transfers to both parents and children parents are more efficient than children in producing output but some parental time must be devoted to child rearing at low levels of development fertility is high and the flow of net intergenerational transfers is from the young to the old at high levels of development fertility is low and the flow of net transfers is from the old to the young these results accord strongly with empirical observations and the analysis may be seen as formalising for the first time a long standing and well respected hypothesis in the demographic transition literature

reference points and effort provision a key open question for theories of reference dependent preferences is what determines the reference point one candidate is expectations what people expect could affect how they feel about what actually occurs in a real effort experiment we manipulate the rational expectations of subjects and check whether this manipulation influences their effort provision we find that effort provision is significantly different between treatments in the way predicted by models of expectation based reference dependent preferences if expectations are high subjects work longer and earn more money than if expectations are low

risk bearing and the theory of income distribution this paper develops the stochastic theory of distribution with a dynamic model which focuses on the role of incomplete insurance in generating inequality unlike previous work our approach takes explicit account of the reason for market incompleteness in modeling agents behaviour in particular the amount of risk borne is endogenous using a model of growth with altruism in which agents are risk averse and there is moral hazard we show that lineage wealth follows a markov process which converges globally to an ergodic distribution this also represents the long run population distribution of wealth we discuss the role of particular assumptions such as availability of production loans and unboundedness of utility in yielding the qualitative properties of the distribution of wealth the choice of occupation and the prevention of poverty traps