Time Discounting and Wealth Inequality

Thomas Epper; Ernst Fehr; Helga Duda-Fehr; Claus Thustrup Kreiner; David Dreyer Lassen; Søren Leth-Petersen; Gregers Nytoft Rasmussen

Time Discounting and Wealth Inequality

Thomas Epper, Ernst Fehr, Helga Duda-Fehr, Claus Thustrup Kreiner, David Dreyer Lassen, Søren Leth-Petersen, Gregers Nytoft Rasmussen

Abstract

This paper documents a large association between individuals’ time discounting in incentivized experiments and their positions in the real-life wealth distribution derived from Danish high-quality administrative data for a large sample of middle-aged individuals. The association is stable over time, exists through the wealth distribution and remains large after controlling for education, income profile, school grades, initial wealth, parental wealth, credit constraints, demographics, risk preferences and additional behavioral parameters. Our results suggest that savings behavior is a driver of the observed association between patience and wealth inequality as predicted by standard savings theory.

Original language	English
Publisher	CEBI, Center for Economic Behavior and Inequality, Department of Economics, Unversity of Copenhagen
Number of pages	66
Publication status	Published - Aug 2019

Keywords

Faculty of Social Sciences
Wealth inequality
savings behavior
time discounting
experimental methods
administrative data

Access to Document

https://www.econ.ku.dk/cebi/publikationer/working-papers/CEBI_WP_08-19.pdf

Cite this

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title = "Time Discounting and Wealth Inequality",

abstract = "This paper documents a large association between individuals{\textquoteright} time discounting in incentivized experiments and their positions in the real-life wealth distribution derived from Danish high-quality administrative data for a large sample of middle-aged individuals. The association is stable over time, exists through the wealth distribution and remains large after controlling for education, income profile, school grades, initial wealth, parental wealth, credit constraints, demographics, risk preferences and additional behavioral parameters. Our results suggest that savings behavior is a driver of the observed association between patience and wealth inequality as predicted by standard savings theory.",

keywords = "Faculty of Social Sciences, Wealth inequality, savings behavior, time discounting, experimental methods, administrative data",

author = "Thomas Epper and Ernst Fehr and Helga Duda-Fehr and Kreiner, {Claus Thustrup} and Lassen, {David Dreyer} and S{\o}ren Leth-Petersen and Rasmussen, {Gregers Nytoft}",

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AU - Epper, Thomas

AU - Fehr, Ernst

AU - Duda-Fehr, Helga

AU - Kreiner, Claus Thustrup

AU - Lassen, David Dreyer

AU - Leth-Petersen, Søren

AU - Rasmussen, Gregers Nytoft

PY - 2019/8

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N2 - This paper documents a large association between individuals’ time discounting in incentivized experiments and their positions in the real-life wealth distribution derived from Danish high-quality administrative data for a large sample of middle-aged individuals. The association is stable over time, exists through the wealth distribution and remains large after controlling for education, income profile, school grades, initial wealth, parental wealth, credit constraints, demographics, risk preferences and additional behavioral parameters. Our results suggest that savings behavior is a driver of the observed association between patience and wealth inequality as predicted by standard savings theory.

AB - This paper documents a large association between individuals’ time discounting in incentivized experiments and their positions in the real-life wealth distribution derived from Danish high-quality administrative data for a large sample of middle-aged individuals. The association is stable over time, exists through the wealth distribution and remains large after controlling for education, income profile, school grades, initial wealth, parental wealth, credit constraints, demographics, risk preferences and additional behavioral parameters. Our results suggest that savings behavior is a driver of the observed association between patience and wealth inequality as predicted by standard savings theory.

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KW - Wealth inequality

KW - savings behavior

KW - time discounting

KW - experimental methods

KW - administrative data

M3 - Working paper

BT - Time Discounting and Wealth Inequality

PB - CEBI, Center for Economic Behavior and Inequality, Department of Economics, Unversity of Copenhagen

ER -

Time Discounting and Wealth Inequality

Abstract

Keywords

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