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Time Discounting and Wealth Inequality

Author

Listed:
  • Thomas Epper

    (University of St.Gallen, School of Economics and Political Science)

  • Ernst Fehr

    (University of Zurich, Department of Economics)

  • Helga Fehr-Duda

    (University of Zurich, Department of Banking and Finance)

  • Claus Thustrup Kreiner

    (CEBI, Department of Economics, University of Copenhagen)

  • David Dreyer Lassen

    (CEBI, Department of Economics, University of Copenhagen)

  • Soeren Leth-Petersen

    (CEBI, Department of Economics, University of Copenhagen)

  • Gregers Nytoft Rasmussen

    (CEBI, Department of Economics, University of Copenhagen)

Abstract

This paper documents a large association between individuals� time discounting in incentivized experiments and their positions in the real-life wealth distribution derived from Danish high-quality administrative data for a large sample of middle-aged individuals. The association is stable over time, exists through the wealth distribution and remains large after controlling for education, income profile, school grades, initial wealth, parental wealth, credit constraints, demographics, risk preferences and additional behavioral parameters. Our results suggest that savings behavior is a driver of the observed association between patience and wealth inequality as predicted by standard savings theory.

Suggested Citation

  • Thomas Epper & Ernst Fehr & Helga Fehr-Duda & Claus Thustrup Kreiner & David Dreyer Lassen & Soeren Leth-Petersen & Gregers Nytoft Rasmussen, 2019. "Time Discounting and Wealth Inequality," CEBI working paper series 19-08, University of Copenhagen. Department of Economics. The Center for Economic Behavior and Inequality (CEBI).
    • Handle: RePEc:kud:kucebi:1908
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    More about this item

    Keywords

    Wealth inequality; savings behavior; time discounting; experimental methods; administrative data;
    All these keywords.

    JEL classification:

    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • D15 - Microeconomics - - Household Behavior - - - Intertemporal Household Choice; Life Cycle Models and Saving
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth

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