Income Differentials & Rate of Time Preference: A Developing Country Perspective

Ayona Bhattacharjee, Mausumi Das and Mukta Jain
Additional contact information
Ayona Bhattacharjee: International Management Institute, New Delhi
Mausumi Das: Department of Economics, Delhi School of Economics & Shiv Nadar University
Mukta Jain: Department of Economics, Delhi School of Economics & University of Bath

No 354, Working papers from Centre for Development Economics, Delhi School of Economics

Abstract: Estimating time preferences in developing countries like India, is essential for designing public policies that influence savings and investment decisions. However, limited data availability and various economic constraints restrict the estimation process and its analysis. Following Lawrance (1991) framework, this paper adopts Euler equation approach to estimate individual time preferences and assess its relation with one’s income level, in the context of India. Using a national level household survey, the CMIE CPHS dataset spanning 2014-2019, the average RTP for the Indian population is estimated to be 0.0689. It means that on average, individuals in India are willing to forgo 6.89% of future consumption to have the same amount of consumption today. Furthermore, the results show that wealthier individuals are marginally more patient than poorer ones, exhibiting decreasing marginal impatience. These findings have significant policy implications for shaping redistributive, welfare, and growth policies in India.

Keywords: rate of time preference; euler equation; household survey data; India. JEL codes: E21; C61; D91 (search for similar items in EconPapers)
Pages: 42 pages
Date: 2025-03
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.cdedse.org/pdf/work354.pdf

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cde:cdewps:354

Ordering information: This working paper can be ordered from
http://www.cdedse.org/

The price is free.

Access Statistics for this paper

More papers in Working papers from Centre for Development Economics, Delhi School of Economics Delhi 110 007. Contact information at EDIRC.
Bibliographic data for series maintained by Sanjeev Sharma ().