Impatience and Credit Behavior: Evidence from a Field Experiment

42 Pages Posted: 25 Apr 2007

See all articles by Stephan Meier

Stephan Meier

Federal Reserve Bank of Boston; IZA Institute of Labor Economics; Columbia Business School - Management

Charles Sprenger

University of California, San Diego (UCSD)

Date Written: March 2007

Abstract

This paper tests whether heterogeneity of time preferences can explain individual credit behavior. In a field experiment targeting individuals from low-to-moderate income households, we measure individual time preferences through choice experiments, and then match these time preference measures to individual credit reports and annual tax returns. We find that, controlling for disposable income and other individual characteristics, individuals who are less patient have lower credit scores and higher default rates. Moreover, people with dynamically inconsistent (quasi-hyperbolic) preferences have higher active borrowing levels.

Keywords: time preferences, credit behavior, credit scores, delinquencies, field experiment

JEL Classification: D12, D14, D91, C93

Suggested Citation

Meier, Stephan and Sprenger, Charles, Impatience and Credit Behavior: Evidence from a Field Experiment (March 2007). FRB of Boston Working Paper No. 07-3. Available at SSRN: https://ssrn.com/abstract=982398 or http://dx.doi.org/10.2139/ssrn.982398

Stephan Meier (Contact Author)

Federal Reserve Bank of Boston ( email )

600 Atlantic Avenue
Boston, MA 02210
United States

IZA Institute of Labor Economics

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

Columbia Business School - Management ( email )

3022 Broadway
New York, NY 10027
United States

Charles Sprenger

University of California, San Diego (UCSD) ( email )

9500 Gilman Drive
Mail Code 0502
La Jolla, CA 92093-0112
United States

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