Internal and External Validity of Experimental Risk and Time Preferences

Christian Belzil and Modibo Sidibé
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Modibo Sidibé: Duke University

No 10348, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: Using a unique field experiment from Canada, we estimate individual preference over risk and time and show considerable heterogeneity in both dimensions and relatively stable distributions across our various specifications, which include hyperbolic, quasi-hyperbolic discounting as well as subjective failure probability over future payments. We investigate the predictive power (transportability) of the estimated preference parameters when used to explain the take-up decision of higher education grants where financial stakes are approximately seven to fifty times larger than the cash transfers used to elicit preferences. We find that both long-run discount factors and subjective payment failure risk parameters have a high degree of transportability across tasks, while parameters characterizing short-run discount preferences are irrelevant when considering higher-stakes decisions.

Keywords: discounting; risk aversion; time inconsistency; transportability (search for similar items in EconPapers)
JEL-codes: C91 D12 D81 (search for similar items in EconPapers)
Pages: 43 pages
Date: 2016-11
New Economics Papers: this item is included in nep-exp and nep-upt
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Citations: View citations in EconPapers (2)

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