Scandinavian Working Papers in Economics

Working Papers,
Lund University, Department of Economics

No 2016:5: Long Term Stability of Time Preferences and the Role of the Macroeconomic Situation

Hjördis Hardardottir ()
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Hjördis Hardardottir: Department of Economics, Lund University, Postal: Department of Economics, School of Economics and Management, Lund University, Box 7082, S-220 07 Lund, Sweden

Abstract: We look at the stability of survey based subjective time preferences over time using data from a Dutch panel survey with a long time horizon and find that the ranking of individual time preferences is stable. Simple observation of the aggregated measured time preferences reveals instability in aggregated preferences. In order to shed light on this instability we look at the relationship between the individual socio-economic situation and time preferences and the macroeconomic situation and time preferences. While we find no clear relationship between socio-economic situation and time preferences, we find that for the sample as a whole patience is positively correlated with economic growth, but negatively correlated with income inequality. When studying how the estimations differ across income groups we observe that there is a considerable asymmetry in how different income groups react to changes in the macroeconomic situation.

Keywords: Time preferences; stability of preferences; income inequality; economic growth; determinants of preferences

JEL-codes: D01; D63; J31

42 pages, First version: March 9, 2016. Revised: August 29, 2016.

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