Time-Inconsistency and Saving: Experimental Evidence from Low-Income Tax Filers / Damon Jones, Aprajit Mahajan.

Format:

Book

Author/Creator:

Jones, Damon.

Contributor:

National Bureau of Economic Research.

Mahajan, Aprajit.

Series:

Working Paper Series (National Bureau of Economic Research) no. w21272.

NBER working paper series no. w21272

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Other Title:

Time-Inconsistency and Saving

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2015.

Summary:

We conduct a field experiment designed to test theories of time-inconsistency, namely a "Beta-Delta" model of present bias. The experiment takes place in the context of a saving decision made by low-income tax filers who can deposit their income tax refund into an illiquid account. We find qualitative evidence consistent with present-biased preferences. The tradeoff between an earlier payment or a later one is much more skewed toward taking the early payment when the decision is made on the spot than when the decision is made in advance. We estimate a β and δ of 0.34 and 1.08 over an 8-month horizon, respectively, which translates into an annual discount rate of 164%.

Notes:

Print version record

June 2015.