← Search

Estimating Discount Functions with Consumption Choices over the Lifecycle

David Laibson¹; Sean Chanwook Lee¹; Peter Maxted²; Andrea Repetto³; Jeremy Tobacman⁴

¹ Harvard University · ² Berkeley Haas , · ³ Pontificia Universidad Católica de Chile · ⁴ University of Delaware

Abstract We estimate β-δ time preferences and relative risk aversion (RRA) using a lifecycle model including stochastic income, liquid and illiquid assets, credit cards, dependents, Social Security, mortality, and bequests. Preference parameters are identified by cross-tabulating four lifecycle age intervals and four balance sheet moments: the share of households carrying (ie, revolving) credit card debt, average carried credit card debt, average net wealth among households carrying credit card debt, and average net wealth among households not carrying credit card debt. The 16 moments are approximately matched by (MSM) parameter estimates β=0.53, δ=0.99, and RRA = 1.9.

DOI

10.1093/rfs/hhae035

Volume

39 (6)

Pages

1580-1610

Language

en

Export

BibTeX

Sources

openalex crossref