Time Discounting and Economic Decision-Making Among the Elderly

41 Pages Posted: 14 Dec 2016

See all articles by David Huffman

David Huffman

IZA Institute of Labor Economics; Swarthmore College

Raimond Maurer

Goethe University Frankfurt - Finance Department

Olivia S. Mitchell

University of Pennsylvania - The Wharton School; University of Pennsylvania - The Wharton School, Pension Research Council; National Bureau of Economic Research (NBER)

Multiple version iconThere are 2 versions of this paper

Date Written: September 1, 2016

Abstract

This research project evaluates the extent of heterogeneity in time discounting among elderly Americans, as well as its role in explaining older peoples’ key behaviors. We first show how older Americans evaluate simple (hypothetical) intertemporal choices in which payments now are compared with payments in the future. This adds to the literature on time horizon experiments by focusing on a nationally representative sample of persons age 70 . Using the indicators derived from this experiment, we show how differences in discounting patterns are associated with characteristics of particular importance in elderly populations, such as serious health and mental conditions. We then relate our discounting measure to key outcome variables including wealth, the timing of retirement, investments in health, and decisions about end-of-life care.

Keywords: impatience, time preference, self-control, retirement, health, insurance

JEL Classification: D01, D03, D12, D14, D90, E21, G11, I12, I13, J26

Suggested Citation

Huffman, David and Maurer, Raimond and Mitchell, Olivia S., Time Discounting and Economic Decision-Making Among the Elderly (September 1, 2016). Michigan Retirement Research Center Research Paper No. 2016-347, Wharton Pension Research Council Working Paper No. 2016-05, Available at SSRN: https://ssrn.com/abstract=2884182 or http://dx.doi.org/10.2139/ssrn.2884182

David Huffman (Contact Author)

IZA Institute of Labor Economics ( email )

P.O. Box 7240
Bonn, D-53072
Germany

Swarthmore College

500 College Ave
Swarthmore, PA 19081
United States

Raimond Maurer

Goethe University Frankfurt - Finance Department ( email )

Theodor-W.-Adorno-Platz 3
House of Finance
Frankfurt, 60323
Germany

Olivia S. Mitchell

University of Pennsylvania - The Wharton School ( email )

Philadelphia, PA 19104-6365
United States

University of Pennsylvania - The Wharton School, Pension Research Council ( email )

3302 Steinberg Hall-Dietrich Hall
3620 Locust Walk
Philadelphia, PA 19104-6302
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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