Is There a Daily Discount Rate? Evidence from the Food Stamp Nutrition Cycle
40 Pages Posted: 27 Dec 2003
Date Written: November 20, 2003
Quasi-hyperbolic discounting predicts impatience over short-run tradeoffs. I present a direct non-laboratory test of this implication using data on the nutritional intake of food stamp recipients. Caloric intake declines by 10 to 15 percent over the food stamp month, implying a significant preference for immediate consumption. These findings constitute a rejection of the permanent income hypothesis and are extremely difficult to reconcile with exponential discounting. The data support an explanation based on time preference and reject several alternative explanations, including highly elastic intertemporal substitution. I explore implications for the optimal timing of transfer payments under alternative assumptions about preferences.
Keywords: Food stamps, time preference, discounting
JEL Classification: D91, E21, I38
Suggested Citation: Suggested Citation