The Impact of Education on Subjective Discount Rate in Ugandan Villages

Abstract

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in The Impact of Education on the Subjective Discount Rate in Ugandan VillagesMichal Bauer Julie Chytilová The Institute for the Study of Labor (IZA) in Bonn is a local and virtual international research center and a place of communication between science, politics and business. IZA is an independent nonprofit organization supported by Deutsche Post Foundation. The center is associated with the University of Bonn and offers a stimulating research environment through its international network, workshops and conferences, data service, project support, research visits and doctoral program. IZA engages in (i) original and internationally competitive research in all fields of labor economics, (ii) development of policy concepts, and (iii) dissemination of research results and concepts to the interested public. D I S C U S S I O N P A P E R S E R I E SIZA Discussion Papers often represent preliminary work and are circulated to encourage discussion. Citation of such a paper should account for its provisional character. A revised version may be available directly from the author. Heterogeneity in time discounting may reinforce the existing barriers to save and invest faced by rural populations in developing countries. We elicit a subjective discount rate for a varied sample of Ugandan villagers. In accordance with other studies, we have found the discount rate to decrease with education. We examine this correlation further by testing the causal effect of education and exploit two different sources of its variation: school frequency across villages and the number of the respondents' school-going years that overlap with the era of the dictator Idi Amin's rule. For men, we find that education has a significant impact on their discount rate, similar in magnitude for both types of instruments and robust to observable characteristics. This finding highlights the importance of education in development.JEL Classification: C93, D91, O12

Smart Money? The Effect of Education on Financial Outcomes

“…Linking education definitively to "smarter" financial decision-making (e.g., alpha) is extremely challenging because education may affect many intermediate factors, such as labor market opportunities and the quality of financial advice, as well as more nebulous factors, such as temperament and discount rates (see Bauer and Chytilová, 2010, for example). One approach might be to try to isolate other factors by conducting a laboratory-style elicitation of the knowledge and preferences of 18 year olds; this would come with the cost of examining only artificial decisions.…”

Relation Between Time Perspective and Delay Discounting: A Literature Review

“…Compatible with these results, Harrison et al (2002) found in a sample of Danish participants that individuals with longer investments in education had substantially lower discount rates. Bauer and Chytilová (2009) assessed the impact of education on discount rates of Ugandan villagers by exploiting two independent exogenous sources of variation in schooling, across villages and over time, and also found that the degree of delay discounting decreased with education. Similarly, Kirby et al (2002) found that discount rates in Tsimane' Amerindians of the Bolivian rain forest decreased with increases in educational levels and literacy and tended to decrease as recent income rose.…”

Explaining environmental health behaviors: evidence from rural India on the influence of discount rates

“…The personal discount rate has been tested as a determinant of a range of behaviors involving intertemporal tradeoffs such as savings (Ashraf et al, 2006), debt (Meier and Sprenger, 2010), credit scores (Arya et al, 2013), gambling (Dixon et al, 2003), crime (Nagin and Pogarsky, 2004), investment in children (Agee and Crocker, 2000), and participation in unhealthy behaviors (Lawless et al, 2013;Story et al, 2014). This includes a small but growing number of studies in developing countries (Lumley, 1997;Godoy et al, 1998;Nielsen, 2001;Yesuf, 2004;Bauer and Chytilová, 2010;Bauer et al, 2012;Liebenehm and Waibel, 2014;Rieger, 2015;Nguyen et al, 2016). Chabris et al (2008) found that, in comparison to the other variables used in their study, the discount rate has the most explanatory power for modelling behaviors that involve intertemporal tradeoffs.…”