Cover: Poverty and Time Preference

Poverty and Time Preference

Published Jun 15, 2010

by Leandro Carvalho

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This paper estimates the time preference of poor households in rural Mexico. It uses data from a program that randomly assigned communities to treatment and control and paid transfers to poor households in treatment communities. The randomization implies that differences in consumption between control and treatment households are due to the program. A buffer-stock model predicts how the response of consumption to transfers depends on the discount factor. It estimates this parameter by matching simulated to sample treatment effects on consumption. The estimates being very low, it concludes that poor households are very impatient or a richer model is needed.

This paper series was made possible by the NIA funded RAND Center for the Study of Aging and the NICHD funded RAND Population Research Center.

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