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3 edition of Estimating discount functions with consumption choices over the lifecycle found in the catalog.

Estimating discount functions with consumption choices over the lifecycle

David I. Laibson

Estimating discount functions with consumption choices over the lifecycle

by David I. Laibson

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  • 20 Currently reading

Published by National Bureau of Economic Research in Cambridge, Mass .
Written in English

    Subjects:
  • Consumption (Economics) -- Mathematical models

  • About the Edition

    Intertemporal preferences are difficult to measure. We estimate time preferences using a structural buffer stock consumption model and the Method of Simulated Moments. The model includes stochastic labor income, liquidity constraints, child and adult dependents, liquid and illiquid assets, revolving credit, retirement, and discount functions that allow short-run and long-run discount rates to differ. Data on retirement wealth accumulation, credit card borrowing, and consumption-income comovement identify the model. Our benchmark estimates imply a 40% short-term annualized discount rate and a 4.3% long-term annualized discount rate. Almost all specifications reject the restriction to a constant discount rate. Our quantitative results are sensitive to assumptions about the return on illiquid assets and the coefficient of relative risk aversion. When we jointly estimate the coefficient of relative risk aversion and the discount function, the short-term discount rate is 15% and the long-term discount rate is 3.8%.

    Edition Notes

    StatementDavid Laibson, Andrea Repetto, Jeremy Tobacman.
    SeriesNBER working paper series -- no. 13314., Working paper series (National Bureau of Economic Research) -- working paper no. 13314.
    ContributionsRepetto, Andrea., Tobacman, Jeremy., National Bureau of Economic Research.
    The Physical Object
    Pagination41, [8] p. :
    Number of Pages41
    ID Numbers
    Open LibraryOL17635295M
    OCLC/WorldCa173282285

    Estimating Discount Functions with Consumption Choices Over the Lifecycle David Laibson, Harvard University, Peter Maxted, Harvard University, Andrea Repetto, Adolfo Ibanez University and Jeremy Tobacman, University of Pennsylvania. Discussant(s) Christopher Carroll, Johns Hopkins University Eleanor Dillon, Arizona State University. Consumption is the sole end and purpose of all production — Adam Smith 1. Introduction Consumption accounts for more than two thirds of GDP, more than $10 trillion dollars in the U.S. economy. This spending results from the economic decisions of over million house-File Size: KB.

    Estimating Discount Functions with Consumption Choices Over the Lifecycle By David Laibson, Andrea Repetto, Cited by: 9. The Life-Cycle Model of Consumption and Saving.¤ Martin Browning and Thomas F. Crossleyy May ¤Th is pae rw df o ncl uy mv g t the Journal of Economic Perspectives. The authors thank, without implication, Timothy Taylor, Alan Krueger, Brad De Long, Michael Waldman as File Size: KB.

    Optimal control theory has been extensively used to determine the optimal harvesting policy for renewable resources such as fish stocks. In such optimisations, it is common to maximise the discounted utility of harvesting over time, employing a constant time discount rate. Estimating discount functions with consumption choices over the Cited by: Using choice data to estimate discount rates. Table 1 reports estimates α ̂ obtained by using choice data to estimate the discount function. Specifically, we maximize the choice-based likelihood function in equation (2) for each of our three studies. We also estimate separately the discount rates for each of the three different reward size by:


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Estimating discount functions with consumption choices over the lifecycle by David I. Laibson Download PDF EPUB FB2

Our quantitative results are sensitive to assumptions about the return on illiquid assets and the coefficient of relative risk aversion.

When we jointly estimate the coefficient of relative risk aversion and the discount function, the short-term discount rate is 15% and the long-term discount rate is %. Our quantitative results are sensitive to assumptions about the return on illiquid assets and the coefficient of relative risk aversion.

When we jointly estimate the coefficient of relative risk aversion and the discount function, the short-term discount rate is 15% and the long-term discount rate is %.Cited by: regularities in the lifecycle literature. When we estimate a restricted (exponential) discount function (i.e., = 1), the MSM procedure estimates a single annual discount factor of = By contrast, when we estimate an unre-stricted (present biased) discount function, the MSM procedure estimates File Size: 2MB.

Estimating Discount Functions with Consumption Choices over the Lifecycle Citation: Laibson D, Repetto A, Tobacman J. Estimating Discount Functions with Consumption Choices over the Cited by: Our quantitative results are sensitive to assumptions about the return on illiquid assets and the coe ¢ cient of relative risk aversion.

When we jointly estimate the coe ¢ cient of relative risk aversion and the discount function, the short-term discount rate is 15 % and the long-term discount rate is %. BibTeX @MISC{Laibson07estimatingdiscount, author = {David Laibson and Andrea Repetto and Jeremy Tobacman and David Laibson and Andrea Repetto and Jeremy Tobacman}, title = {Estimating Discount Functions with Consumption Choices over the Lifecycle, NBER.

When we jointly estimate the coefficient of relative risk aversion and the discount function, the short-term discount rate is 15% and the long-term discount rate is %.

Discover the world's research. By contrast, most authors who calibrate exponential discount functions with lifecycle consumption and wealth data have adopted discount rates that are around 5% (Engen, Gale and ScholzHubbard, Skinner and ZeldesLaibson, Repetto and TobacmanEngen, Gale and Uccello ).

By contrast, most authors who ca librate exponential discount functions with lifecycle. consum ption and wealth data have adopted discoun t rates that are around 5% (Engen, Gale and. ScholzHubbard, Skinner and ZeldesLaibson, Repetto and. Estimating Discount Functions with Consumption Choices over the Lifecycle.

Jeremy Tobacman and David Laibson () Authors registered in the RePEc Author Service: Andrea Repetto NoEconomics Series Working Papers from University of Oxford, Department of Economics Abstract: Intertemporal preferences are difficult to measure.

We estimate time preferences using a structural Cited by: Estimating Discount Functions with Consumption Choices over the Lifecycle We estimate time preferences using a structural buffer stock consumption model and the Method of Simulated Moments.

The model includes stochastic labor income, liquidity constraints, child and adult dependents, liquid and illiquid assets, revolving credit, retirement. Consumption and Portfolio Choice over the Life-Cycle Abstract: This paper solves a realistically calibrated life-cycle model of consumption and portfolio choice with non-tradable labor income and borrowing constraints.

Since la-bor income substitutes for riskless asset holdings, the optimal share invested in equities is roughly decreasing over. Estimating Discount Functions with Consumption Choices over the Lifecycle By David Laibson, Andrea Repetto and Jeremy Tobacman Download PDF ( KB).

This change in the effective discount factor implies a lower rate of consumption growth, partially offsetting the effect of a higher interest rate. Laibson () evaluates the magnitude of these effects. For example, when ρ =5, δ =, and β =, then EIS=Cited by: David Laibson & Andrea Repetto & Jeremy Tobacman, "Estimating Discount Functions with Consumption Choices over the Lifecycle," Levine's BibliographyUCLA Department of Economics.

David Laibson & Andrea Repetto & Jeremy Tobacman,   The issue of portfolio choice over the life cycle is encountered by every investor. Popular finance books [e.g., Malkiel ()] and financial counselors generally give the advice to shift the portfolio composition towards relatively safe assets, such as Treasury bills, and away from risky stocks as the investor grows older and reaches retirement.

But what could be the economic justification Cited by: in a life-cycle model. The main contribution of our article is to solve a realistically calibrated life cycle model of consumption and portfolio choice with uninsurable labor income risk, which allows us to obtain a measure of the importance of market-incompleteness and labor income risk for investment behavior.

When we jointly estimate the coefficient of relative risk aversion and the discount function, the short-term discount rate is 15% and the long-term discount rate is %. Reviews User-contributed reviews. Estimating Discount Functions with Consumption Choices over the Lifecycle. David Laibson, Andrea Repetto, Jeremy Tobacman; Economics; ; VIEW 2 EXCERPTS.

HIGHLY INFLUENTIAL. Payday Loans, Uncertainty and Discounting: Explaining Patterns of Borrowing, Repayment, and Default.

10 Laibson, D. Repetto, A. & Tobacman, J. ()Estimating discount functions with consumption choices over the lifecycle. National Bureau of Economic. Estimating Discount Functions with Consumption Choices Over the Lifecycle By David Laibson, Andrea Repetto, Cited by: The Treasury Guidelines on Cost Benefit Analysis, henceforth the “Green Book”, takes as the Social Discount Rate (SDR) an estimate of how society values consumption at different points in time.

This gives a Social Rate of Time Preference (STP) that is appropriate for discounting costs and benefits measured in consumption units. Laibson DI, Repetto A, Tobacman J () Estimating discount functions with consumption choices over the lifecycle.

NBER Working PapersNational Bureau of Economic Research, Inc. Google ScholarCited by: 3.