Time Preferences over the Life Cycle

40 Pages Posted: 5 Mar 2020 Last revised: 29 Jun 2020

See all articles by Wataru Kureishi

Wataru Kureishi

National Institute of Population & Social Security Research

Hannah Paule-Paludkiewicz

Deutsche Bundesbank

Hitoshi Tsujiyama

Goethe University Frankfurt

Midori Wakabayashi

Tohoku University

Date Written: June 1, 2020

Abstract

We study whether and how time preferences change over the life cycle, exploiting representative long-term panel data. We estimate the age patterns of discount rates from age 25 to 80. In order to identify age effects, we have to disentangle them from cohort and period factors. We address this identification problem by estimating individual fixed effects models, where we substitute period effects with determinants of time preferences that depend on calendar years. We find that discount rates decrease with age and the decline is remarkably linear over the life cycle. Using a joint elicitation of time and risk preferences, we also observe qualitatively and quantitatively similar age patterns of discount rates that are adjusted for curvature of utility function.

Keywords: Time Preferences; Preference Stability; Age; Discount Rates

JEL Classification: D01, D12, D91, J10

Suggested Citation

Kureishi, Wataru and Paule-Paludkiewicz, Hannah and Tsujiyama, Hitoshi and Wakabayashi, Midori, Time Preferences over the Life Cycle (June 1, 2020). SAFE Working Paper No. 267, February 2020. Available at SSRN: https://ssrn.com/abstract=3547301 or http://dx.doi.org/10.2139/ssrn.3547301

Wataru Kureishi

National Institute of Population & Social Security Research

Hibiya Kokusai Building 6th Floor
2-2-3 Uchisaiwai-cho
Tokyo 100-0011, Chiyoda-ku 100-0011
Japan

Hannah Paule-Paludkiewicz (Contact Author)

Deutsche Bundesbank ( email )

Wilhelm-Epstein-Str. 14
Frankfurt/Main, 60431
Germany

Hitoshi Tsujiyama

Goethe University Frankfurt ( email )

Gr├╝neburgplatz 1
Frankfurt am Main, 60323
Germany

Midori Wakabayashi

Tohoku University ( email )

27-1 Kawauchi
Aoba-ku, Sendai, Miyagi 980-8576
Japan

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
64
Abstract Views
659
rank
372,518
PlumX Metrics