Pure Time Preference or Situational? What Does the Survey of Consumer Finances Planning Horizon Variable Measure?

Proceedings of the Academy of Financial Services, 2012

15 Pages Posted: 25 Sep 2012 Last revised: 18 Nov 2012

See all articles by Eunice Hong

Eunice Hong

Korean Women’s Development Institute; Ohio State University - Consumer Sciences Department; Sungshin Women's University

Sherman D. Hanna

Ohio State University (OSU)

Date Written: September 25, 2012

Abstract

Many researchers have examined the influence of the Survey of Consumer Finances (SCF) planning horizon variable on household financial behavior such as saving, assuming that it reflected the pure time preference of respondents. However, it is also possible that the variable reflects respondent situations. To examine whether the variable is situational or is a measure of a persistent preference, we used the 1992-2007 SCF datasets and examined the relationship between household characteristics and the planning horizon. The results suggest that the planning horizon variable is situational rather than a constant preference. Researchers using this variable as an explanatory variable should consider structural models rather than single equation models, on order to account for the direct and indirect effects of household characteristics.

Keywords: time preference, Survey of Consumer Finances, intertemporal preferences, saving, credit

JEL Classification: C81, D12, D14, E21

Suggested Citation

Hong, Eunice and Hanna, Sherman D., Pure Time Preference or Situational? What Does the Survey of Consumer Finances Planning Horizon Variable Measure? (September 25, 2012). Proceedings of the Academy of Financial Services, 2012. Available at SSRN: https://ssrn.com/abstract=2152038

Eunice Hong

Korean Women’s Development Institute ( email )

225 Jinheung-ro Eunpyeong-gu
Seoul, 03367
Korea, Republic of (South Korea)
82-2-3156-7139 (Phone)
82-2-3156-7276 (Fax)

Ohio State University - Consumer Sciences Department ( email )

United States

Sungshin Women's University ( email )

249-1 Dong-Dong 3-Ka Sungbuk-Ku
Seoul 136-742
Korea, Republic of (South Korea)

Sherman D. Hanna (Contact Author)

Ohio State University (OSU) ( email )

1787 Neil Avenue
Campbell 265D
Columbus, OH 43210
United States
614-292-4584 (Phone)

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