Working Paper: NBER ID: w18065
Authors: Xavier Gin; Jessica Goldberg; Dan Silverman; Dean Yang
Abstract: The very poor in developing countries often make intertemporal choices that seem at odds with their individual self-interest. There are many possible reasons why. We investigate several of these reasons with a lab-in-the-field experiment in rural Malawi involving large stakes. We make two contributions. First, we construct a new dependent variable: revisions of prior choices regarding the allocation of future income. This allows us to directly examine intertemporal choice revision and its determinants. In particular, this dependent variable permits a novel test for the existence of self-control problems: we find that revisions of money allocations toward the present are positively associated with measures of present-bias from an earlier baseline survey, as well as the (randomly assigned) closeness in time to the first possible date of money disbursement. Second, we investigate other potential determinants of revision, aside from self-control problems. We find little evidence that revisions of money allocations toward the present are associated with spousal preferences for such revision, household shocks or the financial sophistication of respondents.
Keywords: intertemporal choice; self-control; commitment devices; Malawi
JEL Codes: D81; D91; O10
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Revisions of money allocations toward the present (H61) | Present bias (D15) |
| Proximity to the disbursement date (G14) | Revisions of money allocations toward the present (H61) |
| Social pressure from spouses (J12) | Revisions of money allocations toward the present (H61) |
| Household shocks (D19) | Revisions of money allocations toward the present (H61) |
| Financial sophistication (G53) | Revisions of money allocations toward the present (H61) |