Rate of Time Preference, Intertemporal Elasticity of Substitution, and Level of Wealth

Review of Economics and Statistics, Vol. 79, No. 4, November 1997

Posted: 13 Apr 1998

See all articles by Masao Ogaki

Masao Ogaki

Ohio State University

Andrew Atkeson

University of California, Los Angeles (UCLA) - Department of Economics; National Bureau of Economic Research (NBER)

Abstract

The rate of time preference (RTP) and the intertemporal elasticity of substitution (IES) are two important factors shaping intertemporal consumption decisions. Models in which the RTP and/or the IES differ systematically between rich and poor households have different empirical and policy implications for economic development, growth, and the distribution of income and consumption from those of standard models in which these parameters are constant across households. In this paper, we estimate a model in which both RTP and IES are allowed to differ across rich and poor households using household-level panel data from India. Our empirical results are consistent with the view that the RTP is constant across poor and rich households, but the IES is larger for the rich than it is for the poor.

JEL Classification: E21, O11

Suggested Citation

Ogaki, Masao and Atkeson, Andrew G., Rate of Time Preference, Intertemporal Elasticity of Substitution, and Level of Wealth. Review of Economics and Statistics, Vol. 79, No. 4, November 1997, Available at SSRN: https://ssrn.com/abstract=73368

Masao Ogaki (Contact Author)

Ohio State University ( email )

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Andrew G. Atkeson

University of California, Los Angeles (UCLA) - Department of Economics ( email )

Box 951477
Los Angeles, CA 90095-1477
United States

National Bureau of Economic Research (NBER) ( email )

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Cambridge, MA 02138
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