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Empirical Identification of Time Preferences: Theory and An Illustration Using Convex Time Budgets

Antoine Bommier and Bruno Lanz

No 17-02, IRENE Working Papers from IRENE Institute of Economic Research

Abstract: We develop a simple theoretical framework that identifies time preferences without relying on a particular utility function. Our empirical strategy requires observations about intertemporal consumption allocation decisions made under varying relative prices, and seeks to approximate the marginal rate of substitution of consumption at different dates along a constant consumption path. Doing so, we emphasize the importance of measuring the curvature of the intertemporal utility function (or willingness to substitute consumption across time). We illustrate our approach with data derived from the convex time budget procedure of Andreoni and Sprenger (AER, 2012).

Keywords: Intertemporal choice; Discounting behavior; Intertemporal substitution; Discounted utility model; Convex budgets (search for similar items in EconPapers)
JEL-codes: D03 D12 D91 E61 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-mac and nep-upt
Date: 2017-02
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