Fang, H., &Silverman, D. (2009). Time‐inconsistency and welfare program participation: Evidence from the NLSY. International Economic Review, 50(4), 1043-1077.

We empirically implement a dynamic structural model of labor supply and welfare program participation for agents with potentially time‐inconsistent preferences. Using panel data on the choices of single women with children from the National Longitudinal Surveys (NLSY) 1979, we provide estimates of the degree of time‐inconsistency, and of its influence on the welfare take‐up decision. With these estimates, we conduct counterfactual experiments to quantify a measure of the utility loss stemming from the inability to commit to future decisions, and the potential gains from commitment mechanisms such as welfare time limits and work requirements.

 

 

Fang, H., &Silverman, D. (2009). Time‐inconsistency and welfare program participation: Evidence from the NLSY. International Economic Review, 50(4), 1043-1077.

https://doi.org/10.1111/j.1468-2354.2009.00559.x

 

 

DellaVigna, S., &Malmendier, U. (2006). Paying not to go to the gym. American Economic Review, 96(3), 694-719.

How do consumers choose from a menu of contracts? We analyze a novel dataset from three U.S. health clubs with information on both the contractual choice and the day-to-day attendance decisions of 7,752 members over three years. The observed consumer behavior is difficult to reconcile with standard preferences and beliefs. First, members who choose a contract with a flat monthly fee of over $70 attend on average 4.3 times per month. They pay a price per expected visit of more than $17, even though they could pay $10 per visit using a 10-visit pass. On average, these users forgo savings of $600 during their membership. Second, consumers who choose a monthly contract are 17 percent more likely to stay enrolled beyond one year than users committing for a year. This is surprising because monthly members pay higher fees for the option to cancel each month. We also document cancellation delays and attendance expectations, among other findings. Leading explanations for our findings are overconfidence about future self-control or about future efficiency. Overconfident agents overestimate attendance as well as the cancellation probability of automatically renewed contracts. Our results suggest that making inferences from observed contract choice under the rational expectation hypothesis can lead to biases in the estimation of consumer preferences

 

 

DellaVigna, S., &Malmendier, U. (2006). Paying not to go to the gym. American Economic Review, 96(3), 694-719.

https://doi.org/10.1257/aer.96.3.694

 

 

Bruni, L., &Stanca, L. (2008). Watching alone: relational goods, television and happiness. Journal of Economic Behavior &Organization, 65(3), 506-528.

This paper investigates the role of relational goods for subjective well-being. Using a large sample of individuals from the World Values Survey, we find that relational goods have a significant effect on life satisfaction, while television viewing plays a key role in crowding-out relationality. Both results are robust to the use of alternative indicators of relationality and to instrumental variable estimation to deal with possible simultaneity. The findings suggest that the relational treadmill can provide an additional explanation of the income–happiness paradox: the effect of higher income on happiness is offset by lower consumption of relational goods, with television playing a significant role in explaining underconsumption of relationality.

 

 

Bruni, L., &Stanca, L. (2008). Watching alone: relational goods, television and happiness. Journal of Economic Behavior &Organization, 65(3), 506-528.

https://doi.org/10.1016/j.jebo.2005.12.005

 

 

DellaVigna, S., &Paserman, M. D. (2005). Job search and impatience. Journal of Labor Economics, 23(3), 527-588.

Workers who are more impatient search less intensively and set lower reservation wages. The effect of impatience on exit rates from unemployment is therefore unclear. If agents have exponential time preferences, the reservation wage effect dominates for sufficiently patient individuals, so increases in impatience lead to higher exit rates. The opposite is true for agents with hyperbolic time preferences. Using two large longitudinal data sets, we find that impatience measures are negatively correlated with search effort and the unemployment exit rate and are orthogonal to reservation wages. Impatience substantially affects outcomes in the direction predicted by the hyperbolic model.

 

 

DellaVigna, S., &Paserman, M. D. (2005). Job search and impatience. Journal of Labor Economics, 23(3), 527-588.

https://doi.org/10.1086/430286

 

 

Frederick, S., Loewenstein, G., &O& #39;donoghue, T. (2002). Time discounting and time preference: A critical review. Journal of economic literature, 40(2), 351-401.

This paper discusses the discounted utility (DU) model: its historical development, underlying assumptions, and “anomalies” – the empirical regularities that are inconsistent with its theoretical predictions. We then summarize the alternate theoretical formulations that have been advanced to address these anomalies. We also review three decades of empirical research on intertemporal choice, and discuss reasons for the spectacular variation in implicit discount rates across studies. Throughout the paper, we stress the importance of distinguishing time preference, per se, from many other considerations that also influence intertemporal choices.

 

 

Frederick, S., Loewenstein, G., &O’donoghue, T. (2002). Time discounting and time preference: A critical review. Journal of economic literature, 40(2), 351-401.

DOI: 10.1257/002205102320161311  

O& #39;Donoghue, T., & Rabin, M. (1999). Doing it now or later. American Economic Review, 89(1), 103-124.

The authors examine self-control problems–modeled as time-inconsistent, present-biased preferences–in a model where a person must do an activity exactly once. They emphasize two distinctions: do activities involve immediate costs or immediate rewards, and are people sophisticated or naive about future self-control problems? Naive people procrastinate immediate-cost activities and preproperate–do too soon–immediate-reward activities. Sophistication mitigates procrastination but exacerbates preproperation. Moreover, with immediate costs, a small present bias can severely harm only naive people, whereas with immediate rewards it can severely harm only sophisticated people. Lessons for savings, addiction, and elsewhere are discussed.

 

 

O’Donoghue, T., &Rabin, M. (1999). Doing it now or later. American Economic Review, 89(1), 103-124.

DOI: 10.1257/aer.89.1.103

 

 

Angeletos, G. M., Laibson, D., Repetto, A., Tobacman, J., &Weinberg, S. (2001). The hyperbolic consumption model: Calibration, simulation, and empirical evaluation.

Laboratory and field studies of time preference find that discount rates are much greater in the short run than in the long run. Hyperbolic discount functions capture this property. This paper presents simulations of the savings and asset allocation choices of households with hyperbolic preferences. The behavior of the hyperbolic households is compared to the behavior of exponential households. The hyperbolic households borrow much more frequently in the revolving credit market. The hyperbolic households exhibit greater consumption income comovement and experience a greater drop in consumption around retirement. The hyperbolic simulations match observed consumption and balance sheet data much better than the exponential simulations.

 

 

Angeletos, G. M., Laibson, D., Repetto, A., Tobacman, J., &Weinberg, S. (2001). The hyperbolic consumption model: Calibration, simulation, and empirical evaluation. Journal of Economic Perspectives, 15(3), 47-68.

https://doi.org/10.1257/jep.15.3.47

 

 

Cutler, D. M., Glaeser, E. L., &Shapiro, J. M. (2003). Why have Americans become more obese?. Journal of Economic perspectives, 17(3), 93-118.

Americans have become considerably more obese over the past 25 years. This increase is primarily the result of consuming more calories. The increase in food consumption is itself the result of technological innovations which made it possible for food to be mass prepared far from the point of consumption, and consumed with lower time costs of preparation and cleaning. Price changes are normally beneficial, but may not be if people have self-control problems. This applies to some, but not most, of the population.

 

 

Cutler, D. M., Glaeser, E. L., &Shapiro, J. M. (2003). Why have Americans become more obese?. Journal of Economic perspectives, 17(3), 93-118.

https://doi.org/10.1257/089533003769204371

 

 

Shapiro, J. M. (2005). Is there a daily discount rate? Evidence from the food stamp nutrition cycle. Journal of public Economics, 89(2-3), 303-325.

Quasi-hyperbolic discounting predicts impatience over short-run tradeoffs. I present a direct non-laboratory test of this implication using data on the nutritional intake of food stamp recipients. Caloric intake declines by 10 to 15 percent over the food stamp month, implying a significant preference for immediate consumption. These findings constitute a rejection of the permanent income hypothesis and are extremely difficult to reconcile with exponential discounting. The data support an explanation based on time preference and reject several alternative explanations, including highly elastic intertemporal substitution. I explore implications for the optimal timing of transfer payments under alternative assumptions about preferences.

 

 

Shapiro, J. M. (2005). Is there a daily discount rate? Evidence from the food stamp nutrition cycle. Journal of public Economics, 89(2-3), 303-325.

https://doi.org/10.1016/j.jpubeco.2004.05.003