Journal Article

Discount rate heterogeneity among older households: a puzzle?

Date: 01 April 2017
Publisher: Springer
Published in: Journal of Population Economics , Vol. 30, Issue 2, pp. 647–680
JEL classification: D12D31D91E21
DOI: 10.1007/s00148-016-0623-y

We put forward a method for estimating discount rates using wealth and income data. We build consumption from these data using the budget constraint. Consumption transitions yield discount rates by household groups. Applying this technique to a sample of older households, we find a similar distribution to those previously estimated using field data, though with a much lower mean than those found using experiments. Surprisingly, among this older population, patience is negatively correlated with education and numeracy. This goes against the positive correlation found for younger populations in experiments and some field studies. We discuss potential explanations for this result.