Present-Biased Preferences and Credit Card Borrowing
American Economic Journal, Vol. 2, No. 1, pp. 193-210, 2010
18 Pages Posted: 31 Oct 2011
Date Written: 2010
Some individuals borrow extensively on their credit cards. This paper tests whether present-biased time preferences correlate with credit card borrowing. In a field study, we elicit individual time preferences with incentivized choice experiments, and match resulting time preference measures to individual credit reports and annual tax returns. The results indicate that present-biased individuals are more likely to have credit card debt, and to have significantly higher amounts of credit card debt, controlling for disposable income, other socio-demographics, and credit constraints.
JEL Classification: D12, D14, D91
Suggested Citation: Suggested Citation