Rate of time preference, intertemporal elasticity of substitution, and level of wealth

Masao Ogaki; Andrew Atkeson

doi:10.1007/978-4-431-55501-8_8

Rate of time preference, intertemporal elasticity of substitution, and level of wealth

Masao Ogaki, Andrew Atkeson

Faculty of Economics

Research output: Chapter in Book/Report/Conference proceeding › Chapter

Abstract

The rate of time preference (RTP) and the intertemporal elasticity of substitution (IES) are two important factors shaping intertemporal consumption decisions. Models in which the RTP and/or the IES differ systematically between rich and poor households have different empirical and policy implications for economic development, growth, and the distribution of income and consumption from those of standard models in which these parameters are constant across households. In this chapter, we estimate a model in which both RTP and IES are allowed to differ across rich and poor households using household level panel data from India. Our empirical results are consistent with the view that the RTP is constant across poor and rich households, but the IES is larger for the rich than it is for the poor.

Original language	English
Title of host publication	Behavioral Interactions, Markets, and Economic Dynamics
Subtitle of host publication	Topics in Behavioral Economics
Publisher	Springer Japan
Pages	229-247
Number of pages	19
ISBN (Electronic)	9784431555018
ISBN (Print)	9784431555001
DOIs	https://doi.org/10.1007/978-4-431-55501-8_8
Publication status	Published - 2015 Sept 12

Keywords

Consumption growth
India
Wealth-varying RTP and IES models

ASJC Scopus subject areas

Economics, Econometrics and Finance(all)
Business, Management and Accounting(all)
Psychology(all)

UN SDGs

This output contributes to the following UN Sustainable Development Goals (SDGs)

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10.1007/978-4-431-55501-8_8

Cite this

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abstract = "The rate of time preference (RTP) and the intertemporal elasticity of substitution (IES) are two important factors shaping intertemporal consumption decisions. Models in which the RTP and/or the IES differ systematically between rich and poor households have different empirical and policy implications for economic development, growth, and the distribution of income and consumption from those of standard models in which these parameters are constant across households. In this chapter, we estimate a model in which both RTP and IES are allowed to differ across rich and poor households using household level panel data from India. Our empirical results are consistent with the view that the RTP is constant across poor and rich households, but the IES is larger for the rich than it is for the poor.",

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AU - Atkeson, Andrew

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N2 - The rate of time preference (RTP) and the intertemporal elasticity of substitution (IES) are two important factors shaping intertemporal consumption decisions. Models in which the RTP and/or the IES differ systematically between rich and poor households have different empirical and policy implications for economic development, growth, and the distribution of income and consumption from those of standard models in which these parameters are constant across households. In this chapter, we estimate a model in which both RTP and IES are allowed to differ across rich and poor households using household level panel data from India. Our empirical results are consistent with the view that the RTP is constant across poor and rich households, but the IES is larger for the rich than it is for the poor.

AB - The rate of time preference (RTP) and the intertemporal elasticity of substitution (IES) are two important factors shaping intertemporal consumption decisions. Models in which the RTP and/or the IES differ systematically between rich and poor households have different empirical and policy implications for economic development, growth, and the distribution of income and consumption from those of standard models in which these parameters are constant across households. In this chapter, we estimate a model in which both RTP and IES are allowed to differ across rich and poor households using household level panel data from India. Our empirical results are consistent with the view that the RTP is constant across poor and rich households, but the IES is larger for the rich than it is for the poor.

KW - Consumption growth

KW - India

KW - Wealth-varying RTP and IES models

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BT - Behavioral Interactions, Markets, and Economic Dynamics

PB - Springer Japan

ER -

Rate of time preference, intertemporal elasticity of substitution, and level of wealth

Abstract

Keywords

ASJC Scopus subject areas

UN SDGs

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