CLTS Working Papers, Centre for Land Tenure Studies, Norwegian University of Life Sciences
High discount rates: - An artifact caused by poorly framed experiments or a result of people being poor and vulnerable?
Abstract: This study revisits the issue whether poverty and shocks
are associated with high discount rates by using an incentive compatible
Multiple Price List approach in a poor rural population in Africa where a
substantial share of the population had been affected by drought in the
recent rainy season. Randomized treatments included tests for present bias,
magnitude effects and time horizon effects. While the study revealed
significant present bias, magnitude and time horizon effects, average rates
of time preference remained high after correcting for risk aversion.
Exposure to drought increased the average rates of time preference by
Keywords: Time preferences; poverty; climatic shocks; risk aversion; artifactual field experiment; Multiple Price List approach; Malawi; (follow links to similar papers)
JEL-Codes: C93; D91; Q54; (follow links to similar papers)
30 pages, June 18, 2013
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