Time Discounting and Wealth Inequality

By: Epper, ThomasFehr, ErnstFehr-Duda, HelgaThustrup Kreiner, ClausDreyer Lassen, DavidLeth-Petersen, SørenNytoft Rasmussen, Gregers
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 highquality 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: Wealth inequality, savings behavior, time discounting, experimental methods, administrative data
JEL: C91 D31 E21
URL: http://d.repec.org/n?u=RePEc:usg:econwp:2019:16&r=ltv

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