Be patient when measuring hyperbolic discounting: Stationarity, time consistency and time invariance in a field experiment
Wendy Janssens (),
Berber Kramer () and
Journal of Development Economics, 2017, vol. 126, issue C, 77-90
Hyperbolic discounting is one potential reason why savings remain low among the poor. Most evidence of hyperbolic discounting is based on violations of either stationarity or time consistency. Stationarity is violated when intertemporal choices differ for trade-offs in the near versus the more distant future. Time consistency is violated if the optimal allocation for specific dates changes over time. Both types of choice reversals may however also result from time-varying discount rates. Hyperbolic discounting is an unambiguous explanation for choice reversals only if the same individuals violate both stationarity and time consistency. Our field experiment in Nigeria examines the extent to which this is the case. The experiment measured both stationarity and time consistency for the same participants. Violations of the two rarely coincide, especially among more liquidity-constrained participants. Thus, in a context of liquidity constraints, eliciting only one type of choice reversal is insufficient to identify hyperbolic discounting.
Keywords: Time preferences; Hyperbolic discounting; Temporal stability; Liquidity constraints (search for similar items in EconPapers)
JEL-codes: C93 D03 D14 D90 G02 (search for similar items in EconPapers)
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9) Track citations by RSS feed
Downloads: (external link)
Full text for ScienceDirect subscribers only
Working Paper: Be patient when measuring Hyperbolic Discounting: Stationarity, Time Consistency and Time Invariance in a Field Experiment (2016)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:eee:deveco:v:126:y:2017:i:c:p:77-90
Access Statistics for this article
Journal of Development Economics is currently edited by M. R. Rosenzweig
More articles in Journal of Development Economics from Elsevier
Bibliographic data for series maintained by Haili He ().