Self‐Control Problems and Consumption‐Saving Decisions: Theory and Empirical Evidence

15 Pages Posted: 20 Feb 2012

Date Written: March 2012

Abstract

Time‐discounting is a fundamental preference which affects wealth accumulation. If people are impatient, they may spend their earnings instantaneously, and do not save enough for the future. People are often time‐inconsistent, i.e., they often put exceptionally high value on immediate consumption compared to any time in the future. Whether they are aware or not, these individuals are susceptible to self‐control problems. In this paper, we review theoretical and empirical research on time‐inconsistency and self‐control problems, particularly on consumption and saving, and discuss their policy implications.

JEL Classification: D03, D14, O20

Suggested Citation

Tanaka, Tomomi and Murooka, Takeshi, Self‐Control Problems and Consumption‐Saving Decisions: Theory and Empirical Evidence (March 2012). Japanese Economic Review, Vol. 63, Issue 1, pp. 23-37, 2012, Available at SSRN: https://ssrn.com/abstract=2007720 or http://dx.doi.org/10.1111/j.1468-5876.2011.00549.x

Tomomi Tanaka

The World Bank ( email )

1818 H Street, NW
Washington, DC 20433
United States

Takeshi Murooka

Osaka University

1-31 Machikaneyama-cho
Toyonaka
Osaka, 560-0043
Japan

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