American Economic Review Vol. 110 No. 4 2020

Time Discounting and Wealth Inequality

Thomas Epper¹; Ernst Fehr²; Helga Fehr-Duda³; Claus Thustrup Kreiner⁴; David Dreyer Lassen⁴; Søren Leth-Petersen⁴; Gregers Nytoft Rasmussen⁴

¹ School of Economics and Political Science, University of St. Gallen, University of Zurich, and CEBI (email: ) · ² Department of Economics, University of Zurich, and CEBI (email: ) · ³ Department of Banking and Finance, University of Zurich, and CEBI (email: ) · ⁴ Department of Economics, Center for Economic Behavior and Inequality (CEBI), University of Copenhagen (email: )

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.

DOI

10.1257/aer.20181096

Volume

110

Issue

4

Pages

1177-1205

Language

en

Sources

bibtex:phds-export.bib openalex crossref

Cite

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