Template-Type: ReDIF-Paper 1.0
Series: Tinbergen Institute Discussion Papers
Creation-Date: 2011-06-09
Number: 11-087/3
Author-Name: Pieter A. Gautier
Author-Workplace-Name: VU University Amsterdam
Author-Name: Aico van Vuuren
Author-Workplace-Name: VU University Amsterdam
Title: A Flexible Test for Present Bias and Time Preferences using Land-Lease Contracts
Abstract: When agents have present bias, they discount more between now and thenext period than between period t (> 1) and t + 1. How fast the future discount rate (evaluated today) decays is an empirical question. Weshow that the discount function can be non-parametrically identified withcontracts that specify payments that take place at various points in timein the future and which are traded and priced in a competitive market.We use a unique land lease-contract data set for Amsterdam, which hasthe above properties, to test for present bias in a flexible way. We findno evidence for present bias in this market. Even though we allow for ageneral-hyperbolic specification (which has exponential discounting as aspecial case), our estimates converge to an exponential discount functionwith a corresponding discount rate (in our baseline specification) of 8 %.
Classification-JEL: C52, D03, D12
Keywords: present bias, hyperbolic discounting, discount rate, hedonic estimation
File-Url: https://papers.tinbergen.nl/11087.pdf
File-Format: application/pdf
File-Size: 339824 bytes
Handle: RePEc:tin:wpaper:20110087