INTERTEMPORAL CHOICE AND DEVELOPMENT POLICY: NEW EVIDENCE ON TIME‐VARYING DISCOUNT RATES FROM VIETNAM AND RUSSIA

C. Leigh Anderson and Mary Kay Gugerty

The Developing Economies, 2009, vol. 47, issue 2, 123-146

Abstract: Assuming that individual discount rates are constant over time has important implications for policies and programs that involve intertemporal decision making. Using original data from Vietnam and Russia, we find evidence that discount rates do change over time for many individuals, implying that preferences for savings and credit might not be intertemporally consistent. We find that commonly held beliefs about gender and age influences do not hold once having children and location are controlled for. Within countries, however, residency does matter. Rural Vietnamese populations have higher discount rates, and living in a Russian trading town is associated with significantly higher discount rates and present bias than living in a government town. We argue that these behaviors are particularly likely to influence resource allocation in developing economies because there are fewer formal institutions and competitive markets to temper their effects.

Date: 2009
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