Time-Inconsistency and Saving: Experimental Evidence from Low-Income Tax Filers

Damon Jones and Aprajit Mahajan

No 21272, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We conduct a field experiment designed to test theories of time-inconsistency, namely a "Beta-Delta" model of present bias. The experiment takes place in the context of a saving decision made by low-income tax filers who can deposit their income tax refund into an illiquid account. We find qualitative evidence consistent with present-biased preferences. The tradeoff between an earlier payment or a later one is much more skewed toward taking the early payment when the decision is made on the spot than when the decision is made in advance. We estimate a β and δ of 0.34 and 1.08 over an 8-month horizon, respectively, which translates into an annual discount rate of 164%.

JEL-codes: D14 D91 H24 (search for similar items in EconPapers)
Date: 2015-06
New Economics Papers: this item is included in nep-exp and nep-pbe
Note: PE
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Citations: View citations in EconPapers (10)

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