HIV/AIDS, Risk Aversion and Intertemporal Choice

Tinbergen Institute Discussion Paper No. 2007-098/1

34 Pages Posted: 6 Feb 2008

See all articles by Judith Lammers

Judith Lammers

University of Amsterdam; Tilburg University - Center for Economic Research (CentER)

Sweder van Wijnbergen

Universiteit van Amsterdam; Tinbergen Institute; Centre for Economic Policy Research (CEPR); National Bureau of Economic Research (NBER)

Date Written: January 2008

Abstract

This study analyses the relation between perceived health status and intertemporal choice. We use data from experiments with real monetary rewards conducted among students in South Africa to estimate risk and time preferences. These experimental data, based on multiple price lists developed by Coller & Williams (1999), Holt & Laury (2002), and Harrison et al. (2002, 2005a), show that HIV+ agents and participants that perceive to have a high HIV contraction risk are less risk-averse. Although the latter group displays higher discount rates, HIV positive agents seem to have substantially lower discount rates, indicating longer time horizons in spite of their lowered life expectancy. However, we show that direct estimates of discount rates can be seriously biased estimators of the pure rate of time preference when other factors than just the pure rate of time preference are not considered simultaneously. We correct for differential mortality risk, risk aversion and differences in anticipated future marginal utility increases and price in these factors when calculating pure rates of time preference from observed discount rates. Once these factors are taken into account, HIV+ agents' time preferences conform to expectations.

Keywords: discount rate, risk aversion, perceived HIV infection risk, mortality, time preferences, marginal utility, hyperbolic discounting

JEL Classification: D81, D91, I10, I18

Suggested Citation

Lammers, Judith and van Wijnbergen, Sweder, HIV/AIDS, Risk Aversion and Intertemporal Choice (January 2008). Tinbergen Institute Discussion Paper No. 2007-098/1. Available at SSRN: https://ssrn.com/abstract=1090847 or http://dx.doi.org/10.2139/ssrn.1090847

Judith Lammers (Contact Author)

University of Amsterdam ( email )

Spui 21
Amsterdam, 1018 WB
Netherlands

Tilburg University - Center for Economic Research (CentER) ( email )

P.O. Box 90153
Tilburg, 5000 LE
Netherlands

Sweder Van Wijnbergen

Universiteit van Amsterdam ( email )

Roetersstraat 11
Amsterdam, 1018 WB
Netherlands
+31 20 525 4011 / 4203 (Phone)
+31-35-624 91 82 (Fax)

Tinbergen Institute

Burg. Oudlaan 50
Rotterdam, 3062 PA
Netherlands

Centre for Economic Policy Research (CEPR)

London
United Kingdom

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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