Procrastination in the Field: Evidence from Tax Filing

Abstract

Understanding the structure of time preferences allows for accurate predictions of the effects of changing intertemporal incentives. Behavioral models of present bias are used to rationalize field data seemingly at odds with exponential discounting, leveraging additional degrees of freedom to improve in-sample fit. Largely lacking to date are the critical out-of-sample tests necessary to ensure predictive accuracy. This paper contrasts exponential discounting with present-biased procrastination for around 22,000 tax filers, advancing the literature in this domain by providing novel out-of-sample tests for both theories. Present bias provides qualitatively better in-sample fit, matching substantial increases in filing probability as the tax deadline approaches. Present bias also has improved out-of-sample predictive power for responsiveness to the 2008 Stimulus Act, and experimental data demonstrate a link between present bias and filing times. Without present bias, predicted responses to changed incentives are inaccurate, demonstrating its necessity in research and policy applications.

temporal discounting predicts procrastination in a real-world task

“…temporal discounting | procrastination | real-world behavior P rocrastination pervades people's lives; for instance, people delay filing taxes until the last moment (1). Why do people procrastinate?…”

Temporal discounting predicts procrastination in the real world

“…Procrastination is prevalent; it chronically affects approximately 20% of the adult population 1 and up to 70% of undergraduate students 2 . For instance, people delay filing their taxes until the last minute 3 . Researchers postpone until the last minute registering for academic conferences 4 and submitting abstracts and papers 5 .…”

“…The consequences of procrastination are profound, impacting individuals’ achievements and well-being. Procrastination results in lower salaries, shorter employment durations, a higher likelihood of unemployment 9 , and monetary loss 3 . Beyond these tangible effects, procrastinators frequently suffer from mental health challenges, including depression and anxiety, compounded by diminished motivation and low self-esteem 6 , 10 , 11 .…”

Sophistication About Self-Control

“…Google Scholar indicates O'Donoghue and Rabin (1999) has been cited 3,876 times as of June 10, 2021. 2 See, for example,Andersen et al (2008) andAndreoni and Sprenger (2012) for commonly used experimental approaches; Frakes and Wasserman (2020) andMartinez et al (2017) for approaches that infer time-inconsistent…”