Time Preference and Learning Versus Selection

Abstract

With few exceptions, economic theory assumes that people’s valuations of the future - the discount applied to the future as opposed to the present - are fixed and exogenously set. The relevance of this assumption derives from the fact that this parameter of individual preference is critical in determining the likelihood that a person will engage in cooperative action, including the likelihood that they will abide by democratic norms and participate constructively in the development of efficient and competitive markets. Using a sample of Ukrainian youth - those who have emigrated to the West to complete their studies as compared to those who have remained in Ukraine - I question the validity of this assumption. Although the data reveals that those students who travel to the West are an unrepresentative sample of Ukraine’s student population generally in terms of the time discount they apply to the future, the data also suggest that the discount they apply to the future changes as a function of their length of stay in the West.