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Is time preference different across incomes and countries?

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  • De Lipsis, Vincenzo

Abstract

We offer direct statistical evidence of existing differences in time preference across income classes and countries by estimating and testing an Euler equation for consumption on time series data for six European countries and five income quantiles. We unequivocally reject the hypothesis of homogeneous time preference across countries, whereas heterogeneity across income classes is confirmed to different degrees depending on the country, but with time preference being lowest for the last two quantiles of the income distribution.

Suggested Citation

  • De Lipsis, Vincenzo, 2021. "Is time preference different across incomes and countries?," Economics Letters, Elsevier, vol. 201(C).
    • Handle: RePEc:eee:ecolet:v:201:y:2021:i:c:s0165176520304808
    DOI: 10.1016/j.econlet.2020.109720
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    References listed on IDEAS

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    1. Lahoti Rahul & Jayadev Arjun & Reddy Sanjay, 2016. "The Global Consumption and Income Project (GCIP): An Overview," Journal of Globalization and Development, De Gruyter, vol. 7(1), pages 61-108, June.
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    Cited by:

    1. Carneiro, Fernando Moraes & Turnovsky, Stephen J. & Tourinho, Octavio Augusto Fontes, 2022. "Economic growth and inequality tradeoffs under progressive taxation," Journal of Economic Dynamics and Control, Elsevier, vol. 143(C).

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    More about this item

    Keywords

    Time preference; Discount rate; Euler equation; GMM testing;
    All these keywords.

    JEL classification:

    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • C36 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Instrumental Variables (IV) Estimation

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