Experimental measurement of time preference in rural India
1990
Pender, J.L. | Walker, T.S.
Trade-offs between consumption today and consumption tomorrow reflect the rate at which a person prefers the present or discounts the future. Rates of time preference or discount were estimated with experimental games and with hypothetical questions from a random sample of heads of household in two villages of semi-arid tropical India. Mean estimated discount rates, ranging from 0.30 to 0.60, were significantly higher than the average interest rates on debt outstanding. Marked time and magnitude effects were documented. Wealth was inversely and significantly related to the discount rate. A proportional 10 per cent rise in net wealth was accompanied by a 3-7 per cent fall in the estimated rate of time preference. Without economic growth and development, environmental concerns about the future will continue to be divorced from the reality of high rates of positive time preference shown by decision-makers in the present
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