Internal and External Validity of Experimental Risk and Time Preferences

43 Pages Posted: 3 Nov 2016  

Christian Belzil

Ecole Polytechnique, Paris - Department of Economic Sciences; National Institute of Statistics and Economic Studies (INSEE) - National School for Statistical and Economic Administration (ENSAE); Institute for the Study of Labor (IZA); Center for Interuniversity Research and Analysis on Organization (CIRANO)

Modibo Sidibe

Duke University

Multiple version iconThere are 2 versions of this paper

Date Written: October 31, 2016

Abstract

Using a unique field experiment from Canada, we estimate individual preference over risk and time and show considerable heterogeneity in both dimensions and relatively stable distributions across our various specifications, which include hyperbolic, quasi-hyperbolic discounting as well as subjective failure probability over future payments. We investigate the prediction power (transportability) of the estimated preference parameters when used to explain the take-up decision of higher education grants where financial stakes are approximately seven to fifty times larger than the cash transfers used to elicit preferences. We find that both long-run discount factors and subjective payment failure risk parameters have a high degree of transportability across tasks, while parameters characterizing short-run discount preferences are irrelevant when considering higher-stakes decisions.

Keywords: Discounting, Risk Aversion, Time Inconsistency, Transportability

JEL Classification: C91, D12 ,D81

Suggested Citation

Belzil, Christian and Sidibe, Modibo, Internal and External Validity of Experimental Risk and Time Preferences (October 31, 2016). Economic Research Initiatives at Duke (ERID) Working Paper No. 237. Available at SSRN: https://ssrn.com/abstract=2863350

Christian Belzil

Ecole Polytechnique, Paris - Department of Economic Sciences ( email )

Ecole Polytechnique
Department of Economics
Paris, 75005
France

National Institute of Statistics and Economic Studies (INSEE) - National School for Statistical and Economic Administration (ENSAE)

92245 Malakoff Cedex
France

Institute for the Study of Labor (IZA)

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

Center for Interuniversity Research and Analysis on Organization (CIRANO)

2020 rue University, 25th Floor
Montreal, Quebec H3C 3J7
Canada

Modibo Sidibe (Contact Author)

Duke University ( email )

100 Fuqua Drive
Durham, NC 27708-0204
United States

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