Home  About us  Contact
 

Time Preference (time + preference)

Distribution by Scientific Domains
Business, Economics, Finance and Accounting88%

Selected Abstracts

Inflation Stabilisation with Durable Goods and Endogenous Time Preference,

THE ECONOMIC RECORD, Issue 274 2010
ARMAN MANSOORIAN
We consider inflation stabilisation policies for a small open economy with an endogenous time preference when consumption exhibits durability. The time preference effect and the durability effect have competing influences on the adjustment of consumption expenditures, which will likely exhibit an initial boom followed by a recession. Further, inflation stabilisation leads to an increase in labour supply and a boom in investment and output. The country experiences a sharp deterioration in its net foreign asset position. [source]

On the Interaction of Risk and Time Preferences: An Experimental Study

GERMAN ECONOMIC REVIEW, Issue 3 2001
Vital Anderhub
Experimental studies of risk and time preference typically focus on one of the two phenomena. The goal of this paper is to investigate the (possible) correlation between subjects' attitude to risk and their time preference. For this sake we ask 61 subjects to price a simple lottery in three different scenarios. At the first, the lottery premium is paid ,now'. At the second, it is paid ,later'. At the third, it is paid ,even later,. By comparing the certainty equivalents offered by the subjects for the three lotteries, we test how time and risk preferences are interrelated. Since the time interval between ,now' and ,later' is the same as between ,later' and ,even later', we also test the hypothesis of hyperbolic discounting. The main result is a statistically significant negative correlation between subjects' degrees of risk aversion and their (implicit) discount factors. Moreover, we show that the negative correlation is independent of the method used to elicit certainty equivalents (willingness to pay versus willingness to accept). [source]

Time preference and two-country trade

INTERNATIONAL JOURNAL OF ECONOMIC THEORY, Issue 1 2008
Been-Lon Chen
F11; E20; H20 We present a dynamic two-country model of international trade with endogenous time preference. We show that if the two countries have similar preferences, production technologies and labor endowments, there exists a unique and stable steady state such that both consumption and investment goods are produced in both countries. Unlike the case of constant time preferences, the steady state is independent of the initial international distribution of capital. We prove a dynamic Heckscher,Ohlin theorem such that the labor-abundant country exports the labor-intensive good. [source]

Crunch Time: A Policy to Avoid the ,Announcement Effect' when Terminating a Subsidy

GERMAN ECONOMIC REVIEW, Issue 1 2010
Marc Gürtler
Irreversibility; investment; announcement effect; subsidy; tax Abstract. If the government announces the termination of a subsidy paid for an irreversible investment under uncertainty, investors might decide to realize their investment so as to obtain the subsidy. These investors might have postponed an investment if future payment were assured. Depending on the degree of uncertainty and the time preference, the termination of the subsidy might cost the government more in toto than granting the subsidy on a continuing basis. A better strategy would be to reduce the subsidy in parts rather than to terminate the subsidy in its entirety. [source]

On the Interaction of Risk and Time Preferences: An Experimental Study

GERMAN ECONOMIC REVIEW, Issue 3 2001
Vital Anderhub
Experimental studies of risk and time preference typically focus on one of the two phenomena. The goal of this paper is to investigate the (possible) correlation between subjects' attitude to risk and their time preference. For this sake we ask 61 subjects to price a simple lottery in three different scenarios. At the first, the lottery premium is paid ,now'. At the second, it is paid ,later'. At the third, it is paid ,even later,. By comparing the certainty equivalents offered by the subjects for the three lotteries, we test how time and risk preferences are interrelated. Since the time interval between ,now' and ,later' is the same as between ,later' and ,even later', we also test the hypothesis of hyperbolic discounting. The main result is a statistically significant negative correlation between subjects' degrees of risk aversion and their (implicit) discount factors. Moreover, we show that the negative correlation is independent of the method used to elicit certainty equivalents (willingness to pay versus willingness to accept). [source]

Time preference and two-country trade

INTERNATIONAL JOURNAL OF ECONOMIC THEORY, Issue 1 2008
Been-Lon Chen
F11; E20; H20 We present a dynamic two-country model of international trade with endogenous time preference. We show that if the two countries have similar preferences, production technologies and labor endowments, there exists a unique and stable steady state such that both consumption and investment goods are produced in both countries. Unlike the case of constant time preferences, the steady state is independent of the initial international distribution of capital. We prove a dynamic Heckscher,Ohlin theorem such that the labor-abundant country exports the labor-intensive good. [source]

Monetary policy in high inflation open economies: evidence from Israel and Turkey

INTERNATIONAL JOURNAL OF FINANCE & ECONOMICS, Issue 4 2007
Sushanta K. Mallick
Abstract With quarterly data from Israel and Turkey we estimate generalized impulse response functions to show that inflation has no long-run real effects on consumption, investment and the current account balance. The findings are robust even after allowing for inflation volatility obtained through GARCH estimates. We develop an inter-temporal optimizing model of a small open economy with a fixed rate of time preference that supports the empirics. Our model, thus, extends the super-neutrality results (à la Sidrausky) in an open economy paradigm. Copyright © 2007 John Wiley & Sons, Ltd. [source]

OPTIMAL DISCOUNTING IN CONTROL PROBLEMS THAT SPAN MULTIPLE GENERATIONS

NATURAL RESOURCE MODELING, Issue 3 2005
FRANK CALIENDO
ABSTRACT. The principal contribution of this paper is the linking together of separate control problems across multiple generations using the bequest motive, intergenerational altruism, rational expectations, and solution boundary conditions. We demonstrate that discounting at the market rate of interest is an endogenous characteristic of a general equilibrium, optimal control problem that spans multiple generations. Within the confines of our model, we prove that it is optimal to discount at the market rate of interest the social benefits to distant generations from immediate clean up at toxic waste sites if the current generation that bears the cleanup cost is perfectly altruistic towards future generations. Also, we show that this result holds for alternative assumptions regarding pure time preference. Moreover, the result holds regardless of whether selfish interim generations attempt to undo the provisions made for distant generations. In our distortion-free deterministic model, the evidence for intergenerational discounting at the market rate of interest is compelling. [source]

The dynamic efficiency of the Ramsey model with endogenous labour participation rate

OPTIMAL CONTROL APPLICATIONS AND METHODS, Issue 3 2001
João Ricardo Faria
Abstract This paper incorporates the hypothesis of labour participation rate into the Ramsey model. It is shown that the economy can be dynamically inefficient if the average productivity of capital is greater than the sum of the rate of time preference, the population growth rate, the depreciation rate and the marginal rate of substitution between labour and consumption. The modified golden rule holds when the wage rate is equal to the marginal rate of substitution between labour and consumption. However, there is no guarantee that it will happen, since labour supply is driven by capital allocation decisions. Copyright © 2001 John Wiley & Sons, Ltd. [source]

Hypothetical Intertemporal Consumption Choices*

THE ECONOMIC JOURNAL, Issue 486 2003
Arie Kapteyn
The paper extends and replicates part of the analysis by Barsky et al. (1997), which exploits hypothetical choices among different consumption streams to infer intertemporal substitution elasticities and rates of time preference. We use a new and much larger dataset than Barsky et al. Furthermore, we estimate structural models of intertemporal choice, while parameterising the parameters of interest as a function of relevant individual characteristics. We also consider ,behavioural' extensions, like habit formation. Models with habit formation appear to be superior to models with intertemporally additive preferences. [source]

Inflation Stabilisation with Durable Goods and Endogenous Time Preference,

THE ECONOMIC RECORD, Issue 274 2010
ARMAN MANSOORIAN
We consider inflation stabilisation policies for a small open economy with an endogenous time preference when consumption exhibits durability. The time preference effect and the durability effect have competing influences on the adjustment of consumption expenditures, which will likely exhibit an initial boom followed by a recession. Further, inflation stabilisation leads to an increase in labour supply and a boom in investment and output. The country experiences a sharp deterioration in its net foreign asset position. [source]

Monetary Policy in a Small Open Economy with Marshallian Preferences,

THE ECONOMIC RECORD, Issue 268 2009
CONSTANTINE ANGYRIDIS
We study the effects of inflation for a small open economy when the representative agent has Marshallian preferences, with which the rate of time preference is a decreasing function of savings. An increase in the inflation rate reduces the permanent income of the representative agent, which, with Marshallian preferences, also reduces the rate of time preference. Hence, savings falls and the country runs a current account deficit. The numerical evaluations of the model suggest that inflation has significant effects on welfare in the steady state. [source]

GEOGRAPHICAL SPACE AND EFFECTIVE DEMAND UNDER STAGNATION

AUSTRALIAN ECONOMIC PAPERS, Issue 4 2006
WATARU JOHDO
This paper investigates the adjustment mechanism between geographical space and effective demand under stagnation by constructing a spatial model with stagnation included. The model takes the idea of stagnation in Ono (2001) and combines it with the spatial model of Perera-Tallo (2003). The spatial model features local monopolists that import intermediate goods from other monopolists at a cost that can be decreased through investment. Using the integrated model, we reach the following conclusion: the wider the geographical space, the lower the effective demand under stagnation. This mechanism is explained as follows. Under stagnation, where demand has reached an upper bound, a decrease in the marginal cost of reaching distant intermediate suppliers reduces employment. The reason is ,love of variety' in production: for given final output, more variety of available intermediate inputs crowds out per-variety demand of intermediates and thus employment. Decreases in employment then lead to a decrease in the rate of time preference through a rise in the deflation rate, and thereby decrease the desire for consumption, consequently cutting effective demand. [source]

Dynasties and Destiny: On the Roles of Altruism and Impatience in the Evolution of Consumption and Bequests

ECONOMICA, Issue 272 2001
Ita Falk
We study the joint role of altruism and impatience, and the impact of evolution in the formation of long,term time preferences and in the determination of optimal consumption and optimal bequests. We show how the consumption paths of dynasties relate to altruism and to impatience, and we reason that long,lived dynasties will be characterized by a higher degree of altruism and a lower degree of impatience than short,lived dynasties. [source]

RETIREMENT WEALTH AND LIFETIME EARNINGS,

INTERNATIONAL ECONOMIC REVIEW, Issue 2 2007
Lutz Hendricks
This article argues that a satisfactory theory of wealth inequality should account not only for the marginal distribution of wealth, but also for the joint distribution of wealth and earnings. The article describes the joint distribution of retirement wealth and lifetime earnings in the Panel Study of Income Dynamics. It then evaluates the ability of a stochastic life-cycle model to account for key features of this distribution. The life-cycle model fails to account for three key features of the data. (1) The correlation between lifetime earnings and retirement wealth is too high. (2) The wealth gaps between earnings rich and earnings poor households are too large. (3) Wealth inequality among households with similar lifetime earnings is too small. Models in which households differ in rates of return or time preferences account much better for the joint distribution of retirement wealth and lifetime earnings. [source]

Time preference and two-country trade

INTERNATIONAL JOURNAL OF ECONOMIC THEORY, Issue 1 2008
Been-Lon Chen
F11; E20; H20 We present a dynamic two-country model of international trade with endogenous time preference. We show that if the two countries have similar preferences, production technologies and labor endowments, there exists a unique and stable steady state such that both consumption and investment goods are produced in both countries. Unlike the case of constant time preferences, the steady state is independent of the initial international distribution of capital. We prove a dynamic Heckscher,Ohlin theorem such that the labor-abundant country exports the labor-intensive good. [source]

Kontrolliert und repräsentativ: Beispiele zur Komplementarität von Labor- und Felddaten

PERSPEKTIVEN DER WIRTSCHAFTSPOLITIK, Issue 2009
Armin Falk
Experiments offer highly controlled environments that allow precise testing and causal inferences. Survey and field data on the other hand provide information on large and representative samples of people interacting in their natural environment. We discuss several concrete examples how to combine lab and field data and how to exploit potential complementarities. One example describes an experiment, which is run with a representative sample to guarantee control and representativeness. The second example is based on the idea to experimentally validate survey instruments to ensure behavioral validity of instruments that can be used in existing panel data sets. The third example describes the possibility to use the lab to identify causal effects, which are tested in large data sets. Topics discussed in this article comprise the relation of cognitive skills (IQ) and risk and time preferences, determinants, prevalence and economic consequences of risk attitudes, selection into incentive schemes and the impact of unfair pay on stress. [source]

Strategic Choice of Quantity Stickiness and Stackelberg Leadership

BULLETIN OF ECONOMIC RESEARCH, Issue 1 2001
Midori Hirokawa
This paper re-examines endogenous Stackelberg leader,follower relations by modelling an explicitly dynamic market. We analyze a twice-repeated duopoly where, in the beginning, each firm chooses either a quantity-sticky production mode or a quantity-flexible production mode. The size of the market becomes observable after the first period. In the second period, a firm can adjust its quantity if and only if it has adopted the flexible mode. Hence, if one firm chooses the sticky mode whilst the other chooses the flexible mode, then they respectively play the roles of a Stackelberg leader and a Stackelberg follower in the second marketing period. Somewhat intriguing is the finding that such a Stackelberg-like equilibrium can arise only when the relative weight of the pre-Stackelberg first marketing period is sufficiently high, with time preferences being sufficiently strong. [source]