SUBJECTIVE DISCOUNT RATES AMONG ISRAELI ARABS AND ISRAELI JEWS

Uri Ben-Zion (), Ahmad Mahajna, Ravid Bogaire and Tal Shavit ()
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Uri Ben-Zion: Dept. of Economics, Ben-Gurion University of the Negev, Israel
Ahmad Mahajna: Department of Management and Economics, The Open University of Israel
Ravid Bogaire: Department of Management and Economics, The Open University of Israel

No 710, Working Papers from Ben-Gurion University of the Negev, Department of Economics

Abstract: In this study we compare the subjective discount rate for Israeli Jews and Arabs. All the subjects were bank customers, who were asked to bid and ask prices for delayed fixed amounts and for lotteries. The two populations live in the same country under the same laws. Nevertheless, according to the literature, Israeli Arabs seem to be a discriminated minority, who exhibit traits of a traditional collectivist culture, while Israeli Jews are a majority, who exhibit traits of an individualistic culture. As a discriminated minority, Israeli Arab may suffer from lower trust and as a result, according to the "trust" hypothesis, exhibit higher subjective discount rates and higher risk aversion. On the other hand, according to the “cushion” hypothesis, a collectivist society such as Israeli Arabs, provides a safety net for the individual and as a result, he will exhibit lower subjective discount rates and lower risk-aversion. The experimental findings show that the subjective discount rate and risk aversion of Israeli Arabs are significantly higher than that of Israeli Jews. Moreover, higher percent of Israeli Jews are at the low range of the discount rates (below 10%) and lower percent of Israeli Jews are at the high range of discount rate (above 20%) compared to Israeli Arabs. This is consistent with the "trust" hypothesis. For Israeli Jews the discount rates are closer to the bank interest rate, while Israeli Arabs rates are much higher particularly for receipt. The dispersion of the distribution of discount rate is much larger for Arabs than for Jews.

Keywords: Discounting; Risk aversion; Cross-cultural; Israeli Arabs; Israeli Jews. (search for similar items in EconPapers)
JEL-codes: C93 D14 D81 J15 (search for similar items in EconPapers)
Pages: 29pages
Date: 2007
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Journal Article: Subjective discount rates among Israeli Arabs and Israeli Jews (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:bgu:wpaper:0710

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