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Estimating Individual Discount Rates in Denmark: A Field Experiment

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Paper Number: 2001-02

Document Date: 11/30/2001

Authors: Glenn W. Harrison, Morten I. Lau, Melonie B. Williams

Subject Areas: Benefit-Cost Analysis; Discounting

Keywords: Discount Rates; Time Preference; experimental economics censored dependent variable

Abstract: We estimate individual discount rates with respect to time streams of money using controlled laboratory experiments. These discount rates are elicited by means of field experiments involving real monetary rewards. The experiments were carried out across Denmark using a representative sample of 268 people between 19 and 75 years of age. Individual discount rates are estimated for various households differentiated by socio-demographic characteristics such as income and age. Our conclusions are that discount rates are constant over the 12-month to 3-year horizons used in these experiments, and that discount rates vary substantially with respect to several socio-demographic variables. Hence we conclude that it would be reasonable to assume constant discount rates for specific household types, but not the same rates across all households.

Attachment: 2001-02.pdf (433K, About PDF)

Journal Publication:The American Economic Review 92.5 (2002): 1606-617.

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