time inconsistent preferences and the annuitization decision good news can involve difficult decisions for example winning a lottery jackpot can go along with the decision whether to have the jackpot paid out immediately as a lump sum or as periodic annual payments also when entering retirement most people face the decision whether they want their defined contribution account balance paid as a lump sum or to annuitize that amount the fact that people tend to choose the lump sum even if economic reasons suggest that they should choose the annuity is called the annuity paradox in a large online survey we find that people behave time inconsistent older people have a stronger tendency to choose the lump sum than younger people when they are asked to predict today what to choose when they retire this effect is considerably stronger for participants that answer simple time preference questions inconsistently our findings suggest to think about precommitment devices for the annuitization decision in the retirement case already at the time when the defined benefit plan is started

on the role of small models in macrodynamics abstract this paper focuses on the role of small models in macrodynamics it discusses the insights that i believe these models offer and the extent to which they can address some of the complex issues such as heterogeneity and interactions among agents that are receiving increasing attention in the literature i comment on what i view to be the most productive role for numerical simulations and finally offer some brief comments in defense of the state of modern macroeconomic theory in light of the criticism it has received as a result of the recent financial crisis

monotone stochastic choice models the case of risk and time preferences suppose that when evaluating two alternatives x and y by means of a parametric utility function low values of the parameter indicate a preference for x and high values indicate a preference for y

measuring discounting without measuring utility we introduce a new method to measure the temporal discounting of money unlike preceding methods our method requires neither knowledge nor measurement of utility it is easier to implement clearer to subjects and requires fewer measurements than existing methods

constrained after college student loans and early career occupational choices abstract in the early 2000s a highly selective university introduced a no loans policy under which the loan component of financial aid awards was replaced with grants we use this natural experiment to identify the causal effect of student debt on employment outcomes in the standard life cycle model young people make optimal educational investment decisions if they are able to finance these investments by borrowing against future earnings the presence of debt has only income effects on investment decisions we find that debt causes graduates to choose substantially higher salary jobs and reduces the probability that students choose low paid public interest jobs we also find some evidence that debt affects students academic decisions during college our estimates suggest that recent college graduates are not life cycle agents two potential explanations are that young workers are credit constrained or that they are averse to holding debt we find suggestive evidence that debt reduces students donations to the institution in the years after they graduate and increases the likelihood that a graduate will default on a pledge made during her senior year we argue this result is more likely consistent with credit constraints than with debt aversion

the intrinsic comparative dynamics of infinite horizon optimal control problems with a time varying discount rate and time distance discounting abstract the intrinsic comparative dynamics of a ubiquitous class of optimal control problems with a time varying discount rate and time distance discounting are derived and shown to be characterized by a positive semidefinite matrix it is also shown that the said comparative dynamics are invariant to the functional form of the discount rate function and the type of agent consequently if one limits econometric testing to the basic comparative dynamics of the given class of control problems one cannot determine i the functional form of the discount rate function used by an agent and thus if an agent is a time consistent or time inconsistent decision maker or ii if an agent commits to a plan of action or takes into account the changing nature of his preferences when choosing a plan

demographic structure and capital accumulation a quantitative assessment abstract in a recent paper d albis 2007 demographic structure and capital accumulation journal of economic theory 132 411 434 shows that the effect of population growth on capital accumulation is ambiguous in overlapping generations models with age specific mortality rates contrasting to the predicted negative effect in diamond 1965 national debt in a neoclassical growth model american economic review 55 1126 1150 and blanchard 1985 debt deficits and finite horizons journal of political economy 93 223 247 the quantitative exercises of this paper indicate that while in principle a positive relation between population growth and capital accumulation is possible this relation is practically always negative for industrial countries intuition based on capital dilution and aggregate saving effects is provided this paper also complements d albis 2007 demographic structure and capital accumulation journal of economic theory 132 411 434 in characterizing the steady state equilibrium in more familiar economic concepts

the fisher effect and the term structure of interest rates tests of cointegration the literature on the fisher effect has ignored the potential relationship between inflation and long term interest rates using an expectations model of the term structure of interest rates the authors establish the conditions under which innovations in short term inflation will be transmitted to long term as well as short term interest rates cointegration tests find support for both the fisher effect and the expectations theory of the term structure copyright 1993 by mit press

defined benefit pension plan distribution decisions by public sector employees abstract studies examining pension distribution choices have found that the tendency of private sector workers is to select lump sum distributions instead of life annuities resulting in leakage of retirement savings in the public sector defined benefit pensions usually offer lump sum distributions equal to employee contributions not the present value of the annuity thus for terminating employees that are younger or have shorter tenures the lump sum distribution amount may exceed the present value of the annuity we discuss the factors that may influence the choice to withdraw funds or not in this environment using administrative data from the north carolina state and local government retirement systems we find that over two thirds of public sector workers under age 50 separating prior to retirement from public plans in north carolina left their accounts open and did not request a cash distribution from the pension system within one year of separation furthermore the evidence suggests many separating workers particularly those with short tenure may be forgoing substantial monetary benefits due to lack of knowledge understanding or accessibility of benefits we find no evidence of a bias toward cash distributions for public employees in north carolina

peer effects in financial decision making abstract peer effects might play an important role in complex financial decisions because many consumers lack experience with them and the costs of thinking through such decisions can be very high we study peer effects in retirement savings life insurance purchase and two charitable giving programs in a military setting with plausibly exogenous assignment of individuals to social groups peers defined broadly as social groups which may include members of different ranks appear to play an important role in the charitable giving programs but not in the other outcomes we assess a number of potential reasons for the disparate findings and provide suggestive evidence that the observability of individuals choices is key

time inconsistency and welfare program participation evidence from the nlsy we empirically implement a dynamic structural model of labor supply and welfare program participation for agents with potentially time inconsistent preferences using panel data on the choices of single women with children from the nlsy 1979 we provide estimates of the degree of time inconsistency and of its influence on the welfare take up decision with these estimates we conduct counterfactual experiments to quantify the utility loss stemming from the inability to commit to future decisions and the potential utility gains from commitment mechanisms such as welfare time limits and work requirements

how do behavioral assumptions affect structural inference evidence from a laboratory experiment we use a laboratory experiment to investigate the effect that assuming rational expectations has on structural inference on a dynamic discrete choice decision problem our experimental design induces preferences up to each subject s subjective rates of time preference leaving unrestricted only this parameter and the decision rule that the subject uses in solving the problem we analyze the data under the assumption that all subjects use the rational expectations decision rule and also under weaker behavioral assumptions that allow for heterogeneity in the way people form decisions we find no evidence that assuming rational expectations distorts inferences about the cross sectional distribution of discount rates

estimating dynamic models of quit behavior the case of military reenlistment we estimate the effect of financial incentives for reenlistment on military retention rates using a stochastic dynamic programming model we show that the computational burden of the model is relatively low even when estimated on panel data with unobserved heterogeneity the estimates of the model show strong effects of military compensation especially of retirement pay on retention rates we also compare our model with simpler to compute models and find that all give approximately the same fit but that our dynamic programming model gives more plausible predictions of policy measures that affect military and civilian compensation at future dates

taxation and entrepreneurship in a welfare state does tax policy affect the rate of self employment in a modern welfare state this question is analyzed empirically based on swedish data for the entire postwar period available tax data indicate that payroll taxes have had a negative influence on the unincorporated rate of self employment though the effect is modest no effects from regular labor income taxation or capital gains taxation are found the paper improves upon earlier studies in that it tries to separate the effects of different taxes and uses cointegration techniques a further extension is that it studies a scandinavian high tax welfare state earlier time series studies analyzing self employment and taxation have with few exceptions been based on data from countries with relatively low tax levels and less comprehensive welfare systems notably the usa and the uk

honest on mondays honesty and the temporal separation between decisions and payoffs abstract we show that temporally distancing the decision task from the payment of the reward increases honest behavior each of 427 israeli soldiers fulfilling their mandatory military service rolled a six sided die in private and reported the outcome to the unit s cadet coordinator for every point reported the soldier received an additional half hour early release from the army base on thursday afternoon soldiers who participated on sunday the first work day of the week are significantly more honest than those who participated later in the week we derive practical implications for eliciting honesty

an experimental test of the under annuitization puzzle with smooth ambiguity and charitable giving abstract in a life cycle model with a bequest motive we study the impact of smooth ambiguity aversion to uncertain survival probabilities on the optimal demand for annuities we implement a theory driven laboratory experiment first a subject s ambiguity attitude is elicited in a simple experimental setting able to make the smooth ambiguity model operational then in a two period annuity bequest decision problem the subject s bequest in the second period is presented as a donation to a previously chosen charity contingent to the subject being active after the first period in line with the theoretical predictions we find that ambiguity averse resp loving subjects invest less resp more in annuities than ambiguity neutral ones furthermore subjects contingent donation to the chosen charity increases in their investment in annuities only for sufficiently high levels of warm glow altruism

exploring the diffusion of low energy houses an empirical study in the european union abstract diffusion of low energy houses is an important part of energy and climate policy in the european union eu and in individual eu countries key barriers to the adoption of low energy houses include additional construction costs and uncertainty surrounding actual energy and cost savings in this paper we econometrically analyze determinants of low energy house adoption including time and risk preferences we rely on original data from a large survey conducted among households in eight eu countries to our knowledge this is the first empirical study of low energy building adoption to rely on a demographically representative sample our set of covariates includes parameters of time and risk preferences that were elicited via state of the art incentivized multiple price list experiments and via self assessment scales we find mixed results for the effects of time discounting on low energy house adoption risk preferences do appear to matter as risk proneness increases so does the adoption of zero net or energy plus building but not passive houses consistent with the low cost hypothesis about environmental attitude and action we find no results for environmental attitudes and social norms

present bias quasi hyperbolic discounting and fixed costs in this paper we elicit preferences for money time pairs via experimental techniques we estimate a general specification of discounting that nests exponential and hyperbolic discounting as well as various forms of present bias including quasi hyperbolic discounting our experimental data do not appear peculiar in any dimension in particular we find clear evidence for present bias as most of the previous literature however no evidence for quasi hyperbolic discounting is found and the data strongly favor instead a specification with a small present bias in the form of a fixed cost of the order of 4 on average across subjects with such a fixed cost the curvature of discounting is imprecisely estimated and exponential discounting is hardly rejected in this specification the present bias tends to vanish for economically relevant monetary rewards

is it really good to annuitize although rational consumers without bequest motives are better off investing exclusively with annuitized instruments in partial equilibrium we demonstrate the welfare effect of annuitization is ambiguous in general equilibrium on account of pecuniary externalities absent institutional constraints like prices and budgets the optimal consumption rule would have marginal utility increase at the preferential discount rate in a rational competitive equilibrium where households fully annuitize the growth rate of marginal utility will be the discount rate minus the interest rate resulting in a consumption profile that is too flat accidental bequests transfer wealth from the old to the young steepening the consumption profile and yielding a better equilibrium if households are restricted to keynesian consumption functions the optimal irrational equilibrium with standard preferences can replicate observed consumption and macroeconomic behavior and the equilibrium without annuities delivers higher utility than the equilibrium with annuities whereas preceding papers have merely hypothesized that households might engage in socially optimal yet irrational behavior the failure of households to annuitize is a real world example of this policymakers should not take steps to encourage more annuitization by the public

iq in the production function evidence from immigrant earnings the cross country growth literature especially sala i martin 1997 sala i martin doppelhofer and miller 2004 has found that traditional education measures rarely have a robust relationship with growth and productivity elementary education being a rare exception by contrast a new empirical growth literature jones and schneider 2006 lynn and vanhanen 2002 ram 2007 weede 2004 weede and kampf 2002 has shown that a nation s average iq has a remarkably robust relationship with its productivity figure 1 that a test designed by psychologists should have such a robust relationship with economic variables is a puzzle that demands explanation for instance jones and schneider showed that national average iq was more robust than other human capital variables and was statistically significant at the 1 level in all 455 growth regressions that controlled for all 18 factors that passed sala i martin doppelhofer and miller s 2004 robustness tests of course as with all the growth regression literature a key difficulty is disentangling cause and effect thus in this article we run no growth regressions whatsoever instead we perform a simple calibration of the iq productivity relationship based on widely agreed upon microeconomic parameters that means we can directly estimate one causal channel running from cognitive ability to productivity in the process we learn the following 1 if one knows the average iq of a nation s citizens as estimated by lynn and vanhanen 2002 2006 one can predict the average wages that immigrants from that country will earn upon their arrival in the united states whether or not one controls for immigrant education and even if the test is completely visual rather than verbal in other words national average iq predicts part of what hendricks 2002 calls unmeasured worker skill 2 we find that a 1 point increase in national average iq predicts 1 higher immigrant wages precisely the value found repeatedly in microeconometric studies note that by construction 1 iq point approximately equal to 1 15th of a standard deviation within any large national population together points 1 and 2 provide further evidence that cross country iq tests are valid predictors of worker productivity 3 when iq is added to the production function in the form implied by traditional externality free human capital theory differences in national average iq are quantitatively significant in explaining cross country income differences that said our productivity accounting exercise does not resolve the puzzle of why high iq countries are 15 times richer than low iq countries in a related vein hanushek and kimko 2000 use national math and science test scores to verify that cognitive skills appear to matter more for groups than for individuals like us they use immigrants to the united states as a way to test whether immigrants bring their home country productivity levels along with them when they immigrate to the united states when they interpret their results within a solow type framework they conclude that the cross country growth equation results are much larger than the corresponding results for individual earnings in sum our article rigorously explores the quantitative magnitude of the puzzle uncovered by hanushek and kimko 2000 and hanushek and woessman 2007 but by using iq tests rather than other widely used math and science test scores we can often double our sample size while simultaneously using the most widely analyzed best understood form of cognitive test we begin with an overview of the recent psychological literature on the validity of iq tests and then proceed to our discussion of the link between iq and immigrant wages the discussion of iq and immigrant wages yields a key parameter gamma the iq semi elasticity of wages which we use in our development accounting exercise we then discuss the questions of reverse causality and trends in the iq productivity relationship over the past 40 yr and conclude by discussing how our results fit into the growth literature

the persistence of financial distress using recently available proprietary panel data we show that while many 35 us consumers experience financial distress at some point in the life cycle most of the events of financial distress are primarily concentrated in a much smaller proportion of consumers in persistent trouble roughly 10 of consumers are distressed for more than a quarter of the life cycle and less than 10 of borrowers account for half of all distress events these facts can be largely accounted for in a straightforward extension of a workhorse model of defaultable debt that accommodates a simple form of heterogeneity in time preference but not otherwise

household debt and income inequality 1963 2003 i construct an economy with heterogeneous agents that mimics the time series behavior of the earnings distribution in the united states from 1963 to 2003 agents face aggregate and idiosyncratic shocks and accumulate real and financial assets i estimate the shocks that drive the model using data on income inequality aggregate income and measures of financial liberalization i show how the model economy can replicate two empirical facts the trend and cyclical behavior of household debt and the diverging patterns in consumption and wealth inequality over time while business cycle fluctuations can account for the short run changes in household debt its prolonged rise of the 1980s and the 1990s can be quantitatively explained only by the concurrent increase in income inequality

the effect of language on economic behavior evidence from savings rates health behaviors and retirement assets languages dier widely in the ways they encode time i test the hypothesis that languages that grammatically associate the future and the present foster future oriented behavior this prediction arises naturally when well documented eects of language structure are merged with models of intertemporal choice empirically i nd that speakers of such languages save more retire with more wealth smoke less practice safer sex and are less obese this holds both across countries and within countries when comparing demographically similar native households the evidence does not support the most obvious forms of common causation i discuss implications for theories of intertemporal choice

optimal annuitization with stochastic mortality and correlated medical costs the conventional wisdom since yaari 1965 is that households without a bequest motive should fully annuitize their investments numerous frictions do not break this sharp result we modify the yaari framework by allowing a household s mortality risk itself to be stochastic due to health shocks a lifetime annuity still helps to hedge longevity risk but the annuity s remaining present value is correlated with medical costs such as those for nursing home care thereby reducing annuity demand even without ad hoc liquidity constraints we find that most households should not hold a positive level of annuities and many should hold negative amounts jel d14 d82 g23 i12 j14 j26

discounting the distant future an experimental investigation we use a laboratory experiment to elicit discount rates over a 20 year time horizon using government savings bonds as a payment vehicle when using a constant exponential discount rate function we find an implied average discount rate of 4 9 which is much lower than has been found in previous experimental studies that used time horizons of days or months however we also find strong support for non constant declining discount rates for longer time horizons with an extrapolated implied annual discount rate approaching 0 5 in 100 years there is heterogeneity in discount rates and risk preferences in that people with more optimistic beliefs about technological progress have higher discount rates these findings contribute to the debate over the appropriate discount rate to use in comparing the long term benefits of climate change mitigation to the more immediate costs

a theory of inalienable property rights why do democratic societies often impose legal restrictions that render various assets or entitlements inalienable to the individual the explanation proposed here is that these constraints arise as an institutional response against financial markets that in a sense work too well that is i demonstrate how a well functioning financial market can potentially work against a social policy designed to ensure a basic minimum standard of living for all types of individuals inalienable property rights and debt constraints emerge as a natural institutional response to the improvident tendencies of some members of society when a majority of individuals share a common distaste for neighborhood squalor

empirical determinants of intertemporal choice abstract we provide new evidence on the empirical determinants of intertemporal financial decisions we use an exogenously imposed choice affecting nearly all croatian retirees to study characteristics associated with choosing a larger deferred stream of payments over a smaller more immediate payment individuals are more willing to defer if they have higher incomes and are not liquidity constrained have a longer time horizon because of better health and longer life expectancy and have stronger bequest motives individuals who expect currency devaluation or political risk to reduce the value of future income are more likely to take the earlier income stream

discounting behavior a reconsideration we re evaluate the theory experimental design and econometrics behind claims that individuals exhibit non constant discounting behavior theory points to the importance of controlling for the non linearity of the utility function of individuals since the discount rate is defined over time dated utility flows and not flows of money it also points to a menagerie of functional forms to characterize different types of non constant discounting behavior the implied experimental design calls for individuals to undertake several tasks to allow us to identify these models and to several treatments such as multiple horizons and the effect of allowing for a front end delay on earlier payments the implied econometrics calls for structural estimation of the theoretical models allowing for joint estimation of utility functions and discounting functions using data collected from a representative sample of 413 adult danes in 2009 we draw striking conclusions assuming an exponential discounting model we estimate discount rates to be 5 6 on average this is significantly lower than all previous estimates using controlled experiments we also find no evidence to support quasi hyperbolic discounting or fixed cost discounting and only modest evidence to support other specifications of non constant discounting furthermore the evidence for non constant discounting while statistically significant is not economically significant in terms of the size of the estimated discount rates we undertake extensive robustness checks on these findings including a detailed review of the previous comparable literature

demographic structure and capital accumulation this paper develops an overlapping generations olg model to analyze the consequences of demographic structure changes induced by an exogenous shift in the birth rate we first show that a finite growth rate of the population that maximizes long run capital per capita exists then we examine the theoretical properties of this growth rate by showing that i it corresponds to the demographic structure such that the average ages of capital holders and workers are equal ii it is associated to an efficient steady state iii it increases with compulsory transfers from younger to older generations finally we explain why standard olg models do not exhibit such a growth rate

discounting cognition and financial awareness new evidence from a change in the military retirement system the choice given military personnel between an immediate cash payment of 30 000 or a more generous retirement pension permits us to estimate individuals personal discount rates pdrs the resulting pdrs about 7 for enlisted personnel and 2 4 3 for officers are precise and are correlated with a variety of other financial behaviors the pdr is negatively related to educational attainment and the armed forces qualification test but cognition seems to operate through channels other than being better informed better informed individuals were not always measured to be more patient jel d91 d14

putting it off for later procrastination and end of fiscal year spending spikes many governments around the world exhibit heightened spending at the end of the fiscal year these end of fiscal year spending spikes often concern policy makers due to their tendency to result in lower quality spending this paper uses uk data to offer evidence against the precautionary savings explanation for spending spikes an alternative explanation is offered with procrastination driving heightened end of fiscal year spending a new technique of time variant budgetary taxes is calibrated to the model and it is shown to be effective for smoothing spending and improving spending efficiency throughout the fiscal year

discount rates inferred from decisions an experimental study two hundred and four students of economics and finance participated in an intertemporal choice experiment which manipulated three dimensions in a 4 4 4 factorial design scenario postponing a receipt postponing a payment expediting a receipt expediting a payment time delay 0 5 1 2 and 4 years and size of cashflow 40 200 1000 and 5000 individual discount rates were inferred from the responses and then used to test competitively four hypotheses regarding the behavior of discount rates the classical hypothesis asserting that the discount rate is uniform across scenarios time delays and sums of cashflow was flatly rejected a market segmentation approach was found lacking the results support an implicit risk hypothesis according to which delayed consequences are associated with an implicit risk value and an added compensation hypothesis which asserts that individuals require compensation for a change in their financial position

the today and tomorrow of kids time preferences and educational outcomes of children abstract we experimentally investigate the distribution of children s time preferences along gender and racial lines we find that boys are more impatient than girls and black children are more impatient than white children black boys have the highest discount rates of all groups most importantly we show that impatience has a direct correlation with behavior that is predictive of economic success an increase of one standard deviation in the discount rate is associated with an increase in the number of disciplinary referrals that a child has the following school year by 14 our results suggest that impatience might play an important role in determining the success of performance incentive programs for school children

on the amplification role of collateral constraints abstract this letter explores the role of costly liquidation of the collateralized asset in a stochastic version of the kiyotaki and moore 1997 model we document that the degree of inefficiency in the debt enforcement procedure plays a key role in the endogenous amplification of productivity shocks generated by collateral constraints

estimating the effect of individual time preferences on the use of disease screening economists have long been interested in evaluating the role that time preferences play in a wide range of economic decisions in the health care arena time preferences may be an especially important determinant of many decisions particularly the use of preventative health care one potential barrier to patient adoption of preventative screening regimens is that they impose current costs on consumers with the hope of lower costs in the future using data from a national survey we jointly estimate latent discount rate and preventative service demand models using a limited information maximum likelihood estimator iterated m estimator the results suggest that discount rates are generally inversely related to the likelihood of most screening tests

demographic change and economic growth an inverted u shape relationship abstract the cross country regression and non parametric kernel estimation using the panel data from oecd countries over the 1960 2000 periods show the inverted u shape relationship between demographic changes and economic growth growth rates initially increase and then decrease with population aging

the failure of competition in the credit card market the bank credit card market containing 4 000 firms and lacking regulatory barriers casually appears to be a hospitable environment for the model of perfect competition nevertheless this article reports that credit card interest rates have been exceptionally sticky relative to the cost of funds moreover major credit card issuers have persistently earned from three to five times the ordinary rate of return in banking during the periods 1983 88 the failure of the competitive model appears to be partly attributable to consumers making credit card choices without taking account of the very high probability that they will pay interest on their outstanding balances copyright 1991 by american economic association

identifying individual discount rates and valuing public open space with stated preference models an individual s rate of time preference is an important consideration for individuals deciding whether to support a public good since the benefits of a public good often come in the future our study finds individual discount rates from a contingent valuation method cvm question where the time frame of the payment schedule is varied across surveys we find discount rates similar to the rates found in the recent revealed preference and experimental literature of around 30 our cvm question addresses the preservation of additional open space adjacent to a large regional park at the urban fringe of portland oregon

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

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

estimating individual discount rates in denmark a field experiment we estimate individual discount rates with respect to time streams of money using controlled laboratory experiments these discount rates are elicited by means of field experiments involving real monetary rewards the experiments were carried out across denmark using a representative sample of 268 people between 19 and 75 years of age individual discount rates are estimated for various households differentiated by socio demographic characteristics such as income and age our conclusions are that discount rates are constant over the 12 month to 3 year horizons used in these experiments and that discount rates vary substantially with respect to several socio demographic variables hence we conclude that it would be reasonable to assume constant discount rates for specific household types but not the same rates across all households

interpreting pre trends as anticipation impact on estimated treatment effects from tort reform abstract while conducting empirical work researchers sometimes observe changes in outcomes before adoption of a new policy the conventional diagnosis is that treatment is endogenous this observation is also consistent however with anticipation effects that arise naturally out of many theoretical models this paper illustrates that distinguishing endogeneity from anticipation matters greatly when estimating treatment effects it provides a framework for comparing different methods for estimating anticipation effects and proposes a new set of instrumental variables to address the problem that subjects expectations are unobservable finally this paper examines a specific set of tort reforms that was not targeted at physicians but was likely anticipated by them interpreting pre trends as evidence of anticipation increases the estimated effect of these reforms by a factor of two compared to a model that ignores anticipation

consume now or later time inconsistency collective choice and revealed preference this paper develops a revealed preference methodology for exploring whether time inconsistencies in household choice are the product of nonstationarities at the individual level or the result of individual heterogeneity and renegotiation within the collective unit an empirical application to household level microdata highlights that an explicit recognition of the collective nature of choice allows the vast majority of household behaviour to be rationalised by theory that assumes preference stationarity at the individual level for our particular short panel data set simply permitting limited intrahousehold heterogeneity in time preferences allows the choices of 98 4 of the sample to be rationalised by a model that assumes exponential discounting at the individual level we also find that couples characterized by lower divergence in spousal discount rates are older more likely to have children and wealthier which we take as indications of experiencing higher match quality

testing for educational credit constraints using heterogeneity in individual time preferences i develop a model in which individual time discount rates have a larger effect on human capital accumulation when credit constraints are binding impatient individuals obtain less schooling when borrowing constraints limit the ability to finance consumption during school using data from the nlsy79 i show that self reported measures of time preferences have a significantly higher effect on the college attendance decisions of blacks than those of whites and the decisions of low income youths than those of high income youths these results provide new evidence that members of disadvantaged groups obtain lower levels of schooling because they are credit constrained

social security growth and welfare in overlapping generations economies with or without annuities we examine the impact of a stylized pay as you go paygo social security program in an economy of overlapping generations with equilibrium growth we adopt realistic mortality and other demographic assumptions and allow for the presence or absence of life annuities in all cases steady state economies with paygo social security programs grow more slowly than those without also we find that lifetime expected utilities are lower for existing and future households in steady state economies with social security we also report the effect of social security on the age profile of consumption and explore the effects of longer life expectancy compensating social security program changes and capital subsidies

the personal discount rate evidence from military downsizing programs the military drawdown program of the early 1990s provides an opportunity to obtain estimates of personal discount rates based on large numbers of people making real choices involving large sums the program offered over 65 000 separatees the choice between an annuity and a lump sum payment despite break even discount rates exceeding 17 percent most of the separatees selected the lump sum saving taxpayers 1 7 billion in separation costs estimates of discount rates range from 0 to over 30 percent and vary with education age race sex number of dependents ability test score and the size of payment

patience among children abstract recent policy initiatives offer cash payments to children and often their families to induce better health and educational choices these policies implicitly assume that children are especially impatient i e have high discount rates however little is known about the nature of children s patience how it varies across children and whether children can even make rational inter temporal choices this paper examines the inter temporal choices of 5 to 16 year old children in an artefactual field experiment we examine their choices between varying levels of compensation received in 2 or 4 months in the future and in 0 or 2 months in the future we find that children s choices are consistent with hyperbolic discounting boys are less patient than girls older children are more patient and that mathematical achievement test scores private schooling and parent s patience are not correlated with children s patience we also find that although more than 25 of children do not make rational inter temporal choices within a single two period time frame we cannot find variables that explain this behavior other than age and standardized mathematical achievement test scores