TY - JOUR
T1 - Time preferences over the life cycle and household saving puzzles
AU - Kureishi, Wataru
AU - Paule-Paludkiewicz, Hannah
AU - Tsujiyama, Hitoshi
AU - Wakabayashi, Midori
N1 - Funding Information:
We thank Peter Egger, Nicola Fuchs-Schündeln, Max Groneck, Khanh Hoang, Alexander Ludwig, Benjamin Moll, Emanuel Mönch, Takashi Unayama, the editor and an anonymous referee for helpful comments. The data for the analysis, Japan Household Panel Survey (JHPS/KHPS), were provided by the Keio University Panel Data Research Center. We also used the micro data from the Preference Parameters Study of Osaka University’s 21st Century COE Program ‘Behavioral Macro-Dynamics Based on Surveys and Experiments’, its Global COE project ‘Human Behavior and Socioeconomic Dynamics’ and JSPS KAKENHI 15H05728 ‘Behavioral-Economic Analysis of Long-Run Stagnation’. Kureishi and Wakabayashi acknowledge financial support from JSPS KAKENHI 19K01729. The views expressed in this paper are those of the authors and do not necessarily reflect the views of the Deutsche Bundesbank or the Eurosystem.
Funding Information:
We thank Peter Egger, Nicola Fuchs-Schündeln, Max Groneck, Khanh Hoang, Alexander Ludwig, Benjamin Moll, Emanuel Mönch, Takashi Unayama, the editor and an anonymous referee for helpful comments. The data for the analysis, Japan Household Panel Survey (JHPS/KHPS), were provided by the Keio University Panel Data Research Center. We also used the micro data from the Preference Parameters Study of Osaka University's 21st Century COE Program ‘Behavioral Macro-Dynamics Based on Surveys and Experiments’, its Global COE project ‘Human Behavior and Socioeconomic Dynamics’ and JSPS KAKENHI 15H05728 ‘Behavioral-Economic Analysis of Long-Run Stagnation’. Kureishi and Wakabayashi acknowledge financial support from JSPS KAKENHI 19K01729. The views expressed in this paper are those of the authors and do not necessarily reflect the views of the Deutsche Bundesbank or the Eurosystem.
Publisher Copyright:
© 2021 Elsevier B.V.
PY - 2021/11
Y1 - 2021/11
N2 - Most economic models assume that time preferences are stable over time, but the evidence on their long-term stability is lacking. We study whether and how time preferences change over the life cycle, using representative long-term panel data. We provide new evidence that discount rates decrease with age and the decline is remarkably linear over the life cycle. Decreasing discount rates help a canonical life-cycle model explain the saving puzzles of households undersaving when young and oversaving after retirement. Relative to the model with constant discounting, the model's fit to consumption and asset data profiles improves by 40% and 30%, respectively.
AB - Most economic models assume that time preferences are stable over time, but the evidence on their long-term stability is lacking. We study whether and how time preferences change over the life cycle, using representative long-term panel data. We provide new evidence that discount rates decrease with age and the decline is remarkably linear over the life cycle. Decreasing discount rates help a canonical life-cycle model explain the saving puzzles of households undersaving when young and oversaving after retirement. Relative to the model with constant discounting, the model's fit to consumption and asset data profiles improves by 40% and 30%, respectively.
KW - Discount rates
KW - Household saving puzzles
KW - Preference stability
KW - Time preferences
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U2 - 10.1016/j.jmoneco.2021.10.004
DO - 10.1016/j.jmoneco.2021.10.004
M3 - Article
AN - SCOPUS:85118342117
VL - 124
SP - 123
EP - 139
JO - Carnegie-Rochester Confer. Series on Public Policy
JF - Carnegie-Rochester Confer. Series on Public Policy
SN - 0304-3932
ER -