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What Do We Measure When We Measure Time Discounting? The Impact of Wealth, Growth Rate and Financial Market Accessibility

In: Cultural Finance A World Map of Risk, Time and Money

Author

Listed:
  • Thorsten Hens
  • Marc Oliver Rieger
  • Mei Wang

Abstract

When eliciting time preferences with typical trade-off questions between the present and the future, we do not measure only the discounting factor. Instead, there are several other factors that may influence answers. This is, on the one hand, due to the shape of the subject’s utility function, and, on the other hand, due to the possibility to “hedge” choices by saving or taking a loan. In this chapter, we develop theoretical predictions for the impact of wealth, growth rate, and risk aversion on preferences between intertemporal choices. In our model, access to financial markets is limited (a crucial factor leading to very different predictions as compared to the classical case of complete market access). We confirm the predictions of our model using data from a large international survey on time discounting, conducted in 53 countries.

Suggested Citation

  • Thorsten Hens & Marc Oliver Rieger & Mei Wang, 2020. "What Do We Measure When We Measure Time Discounting? The Impact of Wealth, Growth Rate and Financial Market Accessibility," World Scientific Book Chapters, in: Cultural Finance A World Map of Risk, Time and Money, chapter 3, pages 65-81, World Scientific Publishing Co. Pte. Ltd..
    • Handle: RePEc:wsi:wschap:9789811221958_0003
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    More about this item

    Keywords

    Finance; Culture; International; Time Preferences; Risk Preferences; Decision Theory;
    All these keywords.

    JEL classification:

    • Z1 - Other Special Topics - - Cultural Economics
    • G4 - Financial Economics - - Behavioral Finance
    • D9 - Microeconomics - - Micro-Based Behavioral Economics
    • E7 - Macroeconomics and Monetary Economics - - Macro-Based Behavioral Economics

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