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Discount rate heterogeneity among older households: a puzzle?

Bozio, A; Laroque, G; O'Dea, C; (2016) Discount rate heterogeneity among older households: a puzzle? Journal of Population Economics , 30 (2) pp. 647-680. 10.1007/s00148-016-0623-y. Gold open access

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Abstract

We put forward a method for estimating discount rates using wealth and income data. We build consumption from these data using the budget constraint. Consumption transitions yield discount rates by household groups. Applying this technique to a sample of older households, we find a similar distribution to those previously estimated using field data, though with a much lower mean than those found using experiments. Surprisingly, among this older population, patience is negatively correlated with education and numeracy. This goes against the positive correlation found for younger populations in experiments and some field studies. We discuss potential explanations for this result.

Type: Article
Title: Discount rate heterogeneity among older households: a puzzle?
Open access status: An open access publication
DOI: 10.1007/s00148-016-0623-y
Publisher version: http://doi.org/10.1007/s00148-016-0623-y
Language: English
Additional information: This article is distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/).
Keywords: Time preference, Discount rate, Consumption.
UCL classification: UCL
UCL > Provost and Vice Provost Offices
UCL > Provost and Vice Provost Offices > UCL SLASH
UCL > Provost and Vice Provost Offices > UCL SLASH > Faculty of S&HS
UCL > Provost and Vice Provost Offices > UCL SLASH > Faculty of S&HS > Dept of Economics
URI: https://discovery.ucl.ac.uk/id/eprint/1558653
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