Empirical determinants of intertemporal choice

We provide new evidence on the empirical determinants of intertemporal financial decisions. We use an exogenously imposed choice affecting nearly all Croatian retirees to study characteristics associated with choosing a larger, deferred stream of payments over a smaller, more immediate payment. Indi...

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Bibliographic Details
Published in:Journal of financial economics 2015-06, Vol.116 (3), p.473-486
Main Authors: Brown, Jeffrey R., Ivković, Zoran, Weisbenner, Scott
Format: Article
Language:English
Subjects:
Croatia
Currency devaluation
Decision analysis
Decision making
Discount rate
Eastern Europe
Economic policy
Financial economics
Income
Intertemporal choice
Life expectancy
Liquidity
Pensions
Political risk
Risk theory
Social security
Studies
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Summary:We provide new evidence on the empirical determinants of intertemporal financial decisions. We use an exogenously imposed choice affecting nearly all Croatian retirees to study characteristics associated with choosing a larger, deferred stream of payments over a smaller, more immediate payment. Individuals are more willing to defer if they have higher incomes and are not liquidity constrained, have a longer time horizon because of better health and longer life expectancy, and have stronger bequest motives. Individuals who expect currency devaluation or political risk to reduce the value of future income are more likely to take the earlier income stream.
ISSN:0304-405X
1879-2774
DOI:10.1016/j.jfineco.2015.04.004