Individual Time Preferences Research Articles

Time Preferences and Natural Resource Extraction Behavior: An Experimental Study from Artisanal Fisheries in Zanzibar.

Natural resource users face a trade-off between present and future consumption. Using harmful methods or extracting unsustainably, lowers future consumption. Therefore, it is reasonable to posit that people with higher time preferences extract more as compared to people with lower time preferences. The present study combines experimental methods and questionnaire data in order to understand the relationship between individual time preferences and fishers’ extraction behavior. We elicit individual time preferences using an incentivized experiment, linking the resulting time preference measures to extraction data from a questionnaire, as well as data collected from a framed Common Pool Resource (CPR) experiment. Both the experiments and questionnaire were conducted with artisanal fishers in Zanzibar. Our findings suggest that the relationship between time preferences and CPR extraction is not as straightforward as predicted by classical economic theory. In contrast to earlier studies, we find that fishers’ time preferences are negatively correlated to their extraction rates. Our surprising findings can partly be explained by the fact that higher time preferences are associated with lower investment in extraction capability (the disinvestment effect of time preferences), and by fishers´ cognitive abilities.

Alcohol consumption and individual time preferences of Russians

This paper explores the relationship between socioeconomic factors—particularly, the rate of time preferences and alcohol consumption in Russia. The rate of time preferences shows an individual’s willingness to delay the utility from consumption to future periods of time. The relationship between this rate and indicators of alcohol consumption is examined separately for men and women. We find significant differences in men’s and women’s patterns of consumption of alcohol. Our findings suggest that the rate of time preferences, along with age, educational level, income, place of residence, and health substantially, affects an individual’s decision to drink alcohol. We show that employment status is endogenous to alcohol consumption and that estimating a system of binary equations is necessary.

Time discounting and criminal behavior

One of the most basic predictions of almost any model of crime is that individual time preferences matter. However, empirical evidence on this fundamental property is essentially nonexistent. To our knowledge, this paper provides the first pieces of evidence on the link between time discounting and crime. We use a unique dataset that combines a survey-based measure of time discount rates (at age 13) with detailed longitudinal register data on criminal behavior spanning over 18 y. Our results show that individuals with short time horizons have a significantly higher risk of criminal involvement later in life. The magnitude of the relationship is substantial and corresponds to roughly one-third of the association between intelligence and crime.

Testing for Educational Credit Constraints Using Heterogeneity in Individual Time Preferences

I develop a model in which individual time discount rates have a larger effect on human capital accumulation when credit constraints are binding. Impatient individuals obtain less schooling when borrowing constraints limit the ability to finance consumption during school. Using data from the NLSY79, I show that self-reported measures of time preferences have a significantly higher effect on the college attendance decisions of blacks than those of whites and the decisions of low-income youths than those of high-income youths. These results provide new evidence that members of disadvantaged groups obtain lower levels of schooling because they are credit constrained.

Optimal Drug Control under Risk of Drug Resistance – The Case of African Animal Trypanosomosis

AbstractWe examine two widely used treatment strategies for African animal trypanosomosis in West Africa: preventive drug control ex‐ante trypanosomosis infection and curative drug control ex‐post trypanosomosis infection. We investigate which combination of these alternative strategies is economically optimal for cattle farmers. We apply a dynamic optimisation framework to consider both the negative externality of drug resistance development and human behaviour. We develop a bio‐economic model to simulate the economic consequences of treatment strategies in a dynamic scenario that takes into account the interactions among the vector, host and livestock farmers. This model allows for the evolution of drug‐resistant trypanosomes through trypanocide misuse and simulates the observed behaviours of cattle farmers based on the elicited risk and time preferences of a sample of 202 cattle farmers in Mali and Burkina Faso. The results show that the private optimal mix of treatment strategies for a risk averse and patient farmer involves preventive treatment for susceptible cattle, supported by a small number of curative treatments for infected cattle. Compared with the treatment strategies observed in the field, this optimal mix of treatment strategies would save approximately 5% of the annual income of a livestock farmer in the study area and would reduce the prevalence of trypanosomosis. In addition, we demonstrate that a reduction in a farmer's risk aversion is associated with higher treatment rates that can avoid additional losses. By contrast, a decrease in a farmer's patience is related to lower treatment rates that thwart additional benefits. Our results suggest that individual risk and time preferences need to be considered in the development process of disease control interventions.

Education, individual time preferences, and asymptomatic disease detection

Asymptomatic conditions such as hypertension are generally hard to diagnose, absent routine medical examinations. This is especially problematic in developing countries, where most citizens do not engage in routine examinations due to limited economic resources. We study the roles of education and individual time preferences in asymptomatic disease detection and management. Using discrete choice models on a sample of 4209 hypertensive Indonesian adults surveyed between November 2007 and April 2008, we find that both education and individual time preferences play important roles. However, the effects are different for people in good health than they are for people in bad health. Education does not seem to matter for disease detection when respondents are in good general health, and its effects on disease management vary largely in magnitudes between these groups. In terms of disease detection, more educated respondents have a higher probability of being diagnosed, but only conditional on being in poor general health. Time preferences, on the other hand, matter for respondents in good general health, but the effect is not significant for those in bad health. More impatient respondents that are in good health have a higher probability of being under-diagnosed because they are more likely to forgo routine physicals. The findings point to two distinct channels through which education can affect health, and suggest that different types of policies need to be implemented, in order to reach the entire population. Traditional programs that stimulate education and improve the socio-economic status of individuals in developing countries are helpful, but they do not address the whole problem. Besides its more usual positive effects, education can also negatively affect the health of asymptomatic patients, because it reflects a higher opportunity cost of engaging in preventative health screenings.

Intergenerational transfer of time and risk preferences

There is a growing interest in individual time and risk preferences. Little is known about how these preferences are formed. It is hypothesised that parents may transmit their preferences to their offspring. This paper examines the correlation in offspring and parental time and risk preferences using data from an annual household survey in Australia (the HILDA survey). Both time and risk preferences are examined and we explored whether the correlation in time and risk preferences varies across the distribution of preferences and across the across the four parent–child dyads (mother/daughter, mother/son, father/daughter, father/son). The results show that there is a significant relationship between parents and their young adult offspring risk and time preference measures. The correlation varies across the distribution of time preferences. The correlation was largest for longer planning horizons. Risk averse parents are more likely to have risk averse children. Except for the father/daughter dyad risk seeking parents are more likely to have risk seeking offspring. Some gender differences were found. The association in parental and offspring time preference was larger for mothers than fathers. Daughters are more likely to be influenced by their mother’s risk preferences, however, sons are equally influenced by both parents. The results of this study suggest that the transmission in preferences is more nuanced than previously thought and parental gender may be important.

Three reasons to use annual payments in contingent valuation surveys: Convergent validity, discount rates, and mental accounting

We present three arguments for using ongoing annual payments in contingent valuation (CV) surveys that estimate the benefit of a long-lasting environmental improvement. First, by matching the duration of the payments with the duration of the environmental benefits, survey respondents are spared from performing complicated present value calculations. Second, willingness to pay (WTP) estimates from CV surveys that include ongoing annual payments best match WTP estimates obtained using travel cost surveys. Third, respondents are less likely to face binding mental budget constraints with ongoing annual payments than with a larger one-time payment. In addition, respondents’ discount rates may be estimated by collecting non-hypothetical, individual time preference data as part of the valuation survey.

Characteristics of the Term Structure of Psychological Discount Rate

The discounted utility theory is one of the corner stone of financial theory; particularly in inter-temporal asset pricing and portfolio management. The questioning of this theory has opened a whole field of research in psychology, economics and management and has undergone several enhancements recently. Its violation seems widely established and opened the way for the building of a more efficient framework to understand the time preferences. One improvement is related to the refining of the knowledge on the psychological discount rate function that underlies inter-temporal choices. Thus, an individual time preferences may be characterized by various discounting function such as exponential, Hernstein, Harvey, proportional, Laibson, Rachlin, Hyperbolic or generalized Hyperbolic discounting function. Empirical validation of these psychological discount rate term structures proposed to explain individual preferences and the distribution of their parameters in a given population has been subject to number of recent studies. The aim of this paper is to study empirically the form and parameters of psychological discount rate functions that characterized a given population. Based on the data collected through an experimental study, the violation of the discounted utility theory is confirmed, that mean that time preferences could not be characterized by an exponential discounting function. This finding is consistent with other empirical studies and shows that the population is characterized by a decreasing impatience. In addition, it shows that the population is characterized by an heterogeneity of the psychological discount rate functions.

Time preferences and career investments

This paper examines the role of time preferences in career investments. We focus on the effects of patience on two types of career investments: work effort and on-the-job search. Whereas the former increases the probability of obtaining a promotion, the latter affects the chance of receiving an outside job offer. We propose a theoretical career model which allows for these two distinct career paths. To test the theoretical predictions, we make use of the DNB Household Survey. This large Dutch longitudinal survey contains detailed information on individual time preferences, on-the-job search behaviour and indicators of work effort. The results show that on-the-job search and work effort increase with patience. The relation between patience and job mobility is more ambiguous. These findings may be hard to reconcile with standard on-the-job search models but can be rationalized by models in which work effort and on-the-job search are substitutes.

Education, Individual Time Preferences, and Asymptomatic Disease Detection

We study the roles of education and individual time preferences for asymptomatic disease detection and management. Using a sample of 4209 hypertensive Indonesian adults, we find that both education and individual time preferences play important roles. However, the effects are different for people in good health than they are for people in bad health. Education in particular does not seem to matter for disease detection when respondents are in good general health, and its effects on disease management vary largely in magnitudes between these groups. These facts point to two distinct channels through which education can affect health, and suggest that different types of policies need to be implemented, in order to reach the entire population. Traditional programs that stimulate education and improve the socio-economic status of individuals in developing countries are helpful, but they do not address the whole problem.

Individual Time Preferences and Energy Efficiency

We examine the role of individual discount rates in energy efficiency decisions using evidence from an extensive survey of US homeowners to elicit preferences for energy efficiency and cash flows over time. We find considerable heterogeneity in individual discount rates. We also find that individual time preferences systematically influence willingness to invest in energy efficiency, as measured through product choices, required payback periods, and energy efficiency tax credit claims. Education is a key driver of individual discount rates. Our findings highlight the importance of individual discount rates to understanding energy efficiency investments, the energy-efficiency gap, and policy evaluation.

Intra Marriage Bargaining Power and Fertility Decisions for Women in Developing Countries

Two types of theoretical bargaining models can be employed to study issues on intra marriage bargaining - a competitive and a cooperative bargaining model. While many seem to support the idea that couples make their decisions together in trying to maximize household level welfare, there is no general consensus on which type of model is more appropriate. One particular result that seems to suggest that couples do actually bargain competitively is the result that links fertility decisions to bargaining power. The argument is that women prefer less children than men, and that bargaining power influences fertility. However, we argue, these studies are suffering from endogeneity issues that are not properly instrumented for. We propose instruments for bargaining power based on individual risk and time preferences which affect the threat point and bargaining power of spouses, but not the fertility decisions directly. Using this identification strategy, we show that fertility decisions do not depend on bargaining power, which supports the unitary bargaining model. We argue that the previous results were either not addressing the endogeneity issues at all, or based on invalid instruments that were not fully exogenous.

Present bias predicts participation in payments for environmental services: Evidence from a behavioral experiment in Uganda

Farmers are necessary agents in global efforts to conserve the environment now that croplands and pastures together constitute the largest terrestrial system on Earth – covering some 48% of ice-free land surface. Whereas standard economic models predict that farmers will participate in conservation programs so long as they are profitable, empirical findings from behavioral economics point to a number of normally unobservable preferences that may influence the decision-making process. This study tests, for the first time, whether heterogeneity in behavioral preferences correlates with decisions to participate in Payments for Environmental Services (PES) programs. We elicit individual trust and time preferences using economic experiments and link resulting measures to household survey data and participation decisions in a Ugandan PES program. We find that farmers who exhibit a preference for proximate gains – present-biased preferences – are 47.7% more likely to participate in the program than those who show time-consistent or future-biased preferences. This result has implications for ongoing and planned PES programs involving farmers, particularly in Africa, by highlighting a potential relationship between payment timing and participation, and further validates the use of behavioral experiments in explaining real-world decisions.

Estimating the Relationship Between Rate of Time Preferences And Socio-Economic Factors In Russia

1. Introduction Since the 19th century, economists have paid attention to the problem of intertemporal choice and its causes. Economic aspects of intertemporal choice have been examined, as well as the sociological and psychological aspects. Note on the Measurement of Utility, a paper by Samuelson in 1937, was a turning point for views on intertemporal choice, describing a discounted utility model. The main assumption of this model is that all the motives underlying intertemporal choice can be described in a single parameter called a discount rate. This (an discount (IDR) or a rate of time (RTP)) reflects individual time preferences for obtaining utility from consumption, and shows how disadvantageous future utility is when compared to present utility. The higher the of time preference, the more impatient the individual is. A positive means that, all other things being equal, an individual prefers the utility from consumption now, rather than later. Despite the broad use of the discounted utility concept, there is criticism about it. For instance, Frederick and co-authors distinguish time discounting and time preferences (Frederick et al, 2002). They emphasize that the same of time preferences does not apply to all forms of consumption. Despite this criticism, we support the evidence of recent empirical studies that of time preference reflects an individual's intertemporal choice, particularly healthy/unhealthy behavior. Many research papers confirm the relationship between of time preference and obesity (Komlos 2004), health care demand (Bradford 2010, Thalassinos et al. 2010), and smoking (Harrison 2009, Scharff and Viscusi 2011). An estimation of this and the analysis of relevant factors are useful for policy-makers since the economic costs of an unhealthy lifestyle are significant for society. Such analysis is frequently conducted abroad, for example, the research of Harrison for Denmark (Harrison 2002). The usefulness of the of time preferences for government decision-making is highlighted in many studies (Grignon 2009; Bradford 2010). The popularity of the of time preferences abroad has not spread to Russia. Our research aims to measure the relationship between various socio-economic factors and of time preferences in Russia. The results of individual discount estimation and conclusions on the socio-economic factors affecting this can help to improve government policy through a deeper understanding of individual intertemporal choice and to achieve budget savings through improved decision-making. 2. Individual Intertemporal Choice and Socio-Economic Factors 2.1. The Rate of Time Preferences and Problems with its Estimation Various studies suggest using a survey for of time preference evaluation. Here respondents choose either to receive a certain amount of money today or to postpone in exchange for a cash reward to be received at a later date. The answers show the individual time preferences of respondents. The most common ways of constructing questions are as following (Fuchs 1982): * An experimenter offers a respondent a sum of money relating to the future and asks what smaller amount would be acceptable to receive immediately; * An experimenter offers a respondent a sum of money today and asks what minimum amount would be acceptable in the future to compensate the delay in receiving money; * An experimenter offers a respondent two sums of money and asks what time period would make these sums equivalent. Estimating of time preferences faces several problems. First, respondents may inaccurately predict their behavior or not give answers at all. Second, the is not constant with increases in the planning horizon (Tasset et al. 1999). Most economists agree that the of time preference decreases with time. Individuals tend to be more patient in the long-run than in the short-run (Angeletos et al. …

Procrastinators and hyperbolic discounters: Transition probabilities of moving from temporary into regular employment

Temporary agency work (TAW) is believed to facilitate matching between firms and job searchers, which results in shortening the unemployment and job search duration. On the other hand, as firms hiring temporary workers have less incentive to train them, it is difficult for low-skilled temporary workers to find better jobs in the future. This study examines the effect of TAW experience on employment transitions in the Japanese labor market, focusing on individual time preferences. Investments in one’s career involve a trade-off between immediate costs and future rewards, and thus individual heterogeneity in time preferences may explain the behavioral patterns of the labor force in career choices. The results indicate that those who have a higher degree of impatience are likely to engage in the TAW sector. In addition, those who have held temporary jobs are less likely to move into regular job positions, but no significant wage differences are observed between those with the TAW experience and those without the TAW experience. The observed negative effect of TAW on the transition probability into regular employment becomes smaller or statistically insignificant, when time preferences are additionally controlled for. The combined findings suggest that the possible negative effect may be attributed to the difference in the time preferences between individuals with the TAW experience and those without.

Healthy–unhealthy weight and time preference. Is there an association? An analysis through a consumer survey

Individual time preference has been recognized as key driver in explaining consumers' probability to have a healthy weight or to incur excess weight problems. The term time preference refers to the rate at which a person is disposed to trade a current satisfaction for a future benefit. This characteristic may affect the extent at which individuals invest in health and may influence diet choices. The purpose of this paper is to analyse which could be the role of time preference (measured in terms of diet-related behaviours) in explaining consumers' healthy or unhealthy body weight. The analysis also considers other drivers predicted to influence BMI, specifically information searching, health-related activities and socio-demographic conditions. The survey was based on face-to-face interviews on a sample of 240 consumers living in Milan. In order to test the hypothesis, we performed a set of seven ORM regressions, all having consumers' BMI as the dependent variable. Each ORM contains a different block of explanatory variables, while time preference is always included among the regressors. The results suggest that the healthy weight condition is associated with a high orientation to the future, with a high interest in nutrition claims, a low attention to health-related claims, and a high level of education. On the opposite, the probability to be overweight or obese increases when consumers are less future-concerned and is associated with a low searching for nutrition claims and to a high interest in health claims.

How different are smokers? An analysis based on personal finances

We study the association between smoking status and individual decisions, focusing on outcomes in the domain of personal finance. The study draws information on demographic variables, various financial outcomes including individual credit scores, time and risk preferences, and personality traits, from both population data and experimental data. The results suggest that smokers make poor decisions and experience worse outcomes with personal finances vis-à-vis non-smokers. This relationship is robust to controlling for a myriad of variables, including characteristics that are known to be correlated with smoking. Thus, smoking status contains more precise information about individuals that are not fully captured by available noisy economic and psychological measures. Since available estimates of personality traits have substantial measurement error, smoking status may effectively capture residual information.

Cross-border commuting and migration intentions: the roles of risk aversion and time preference

This article analyses the effects of individual risk aversion and time preference on cross-border mobility intentions using a theoretical and empirical model. The paper extends the previous literature by considering both cross-border commuting and migration as modes of mobility. The theoretical model shows that risk aversion has a negative effect on the willingness to migrate and to commute while the effect of time preference depends on expectations about the devel opment of future wages in the home country and abroad. The empirical model, which is based on a multinomial probit regression, confirms the hypotheses regarding risk aversion and shows that the rate of time preference has a nonlinear effect on migration and commuting intentions consistent with expectations of higher real wage growth in the home country than abroad. The analysis sheds light on how time preference and risk aversion influence mobility decisions. This is especially important for integrating border regions in the European Union, in which both migration and commuting are possible.

Stated time preferences for health: a systematic review and meta analysis of private and social discount rates.

The present study aimed to provide better insight on methodological issues related to time preference studies, and to estimate private and social discount rates, using a rigorous systematic review and meta-analysis. We searched PubMed, EMBASE and Proquest databases in June 2013. All studies had estimated private and social time preference rates for health outcomes through stated preference approach, recognized eligible for inclusion. We conducted both fixed and random effect meta-analyses using mean discount rate and standard deviation of the included studies. I-square statistics was used for testing heterogeneity of the studies. Private and social discount rates were estimated separately via Stata11 software. Out of 44 screened full texts, 8 population-based empirical studies were included in qualitative synthesis. Reported time preference rates for own health were from 0.036 to 0.07 and for social health from 0.04 to 0.2. Private and social discount rates were estimated at 0.056 (95% CI: 0.038, 0.074) and 0.066 (95% CI: 0.064, 0.068), respectively. Considering the impact of time preference on healthy behaviors and because of timing issues, individual's time preference as a key determinant of policy making should be taken into account. Direct translation of elicited discount rates to the official discount rates has been remained questionable. Decisions about the proper discount rate for health context, may need a cross-party consensus among health economists and policy makers.