Working Paper: NBER ID: w22438
Authors: David Huffman; Raimond Maurer; Olivia S. Mitchell
Abstract: This paper evaluates the extent of heterogeneity in time discounting among elderly Americans, as well as its role in explaining older peoples’ key behaviors. We first show how older Americans evaluate simple (hypothetical) intertemporal choices in which payments now are compared with payments in the future. This adds to the literature on time horizon experiments by focusing on a nationally representative sample of persons age 70+. Using the indicators derived from this experiment, we show how differences in discounting patterns are associated with characteristics of particular importance in elderly populations, such as serious health and mental conditions. We then relate our discounting measure to key outcome variables including wealth, the timing of retirement, investments in health, and decisions about end of life care.
Keywords: Time Discounting; Elderly; Economic Decision Making; Retirement; Health Investments
JEL Codes: D01; D03; D12; D14; E21; G11; I12; J26
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| higher internal rates of return (IRR) (G31) | lower net wealth (G51) |
| serious health conditions (I12) | higher internal rates of return (IRR) (G31) |
| higher internal rates of return (IRR) (G31) | fewer healthy behaviors (I12) |
| higher internal rates of return (IRR) (G31) | less preparation for end-of-life challenges (I19) |
| lower internal rates of return (IRR) (G19) | fewer healthy behaviors (I12) |
| lower internal rates of return (IRR) (G19) | less preparation for end-of-life challenges (I19) |
| serious health conditions (I12) | higher discounting (H43) |
| higher discounting (H43) | less saving (E21) |
| impatience (D84) | lower net wealth (G51) |
| impatience (D84) | fewer healthy behaviors (I12) |
| impatience (D84) | less preparation for end-of-life challenges (I19) |