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Journal of Economic Literature

ISSN 0022-0515 (Print) | ISSN 2328-8175 (Online)

Measuring Time Preferences

  • Jonathan Cohen
  • Keith Marzilli Ericson
  • David Laibson
  • John Myles White
Journal of Economic Literature
vol. 58, no. 2, June 2020
(pp. 299–347)
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Abstract

We review research that measures time preferences—i.e., preferences over intertemporal trade-offs. We distinguish between studies using financial flows, which we call "money earlier or later" (MEL) decisions, and studies that use time-dated consumption/effort. Under different structural models, we show how to translate what MEL experiments directly measure (required rates of return for financial flows) into a discount function over utils. We summarize empirical regularities found in MEL studies and the predictive power of those studies. We explain why MEL choices are driven in part by some factors that are distinct from underlying time preferences.

Citation

Cohen, Jonathan, Keith Marzilli Ericson, David Laibson, and John Myles White. 2020. "Measuring Time Preferences." Journal of Economic Literature, 58 (2): 299–347. DOI: 10.1257/jel.20191074

Additional Materials

JEL Classification

  • C61 Optimization Techniques; Programming Models; Dynamic Analysis
  • D15 Intertemporal Household Choice; Life Cycle Models and Saving