Quasi-hyperbolic Time Preferences and Their Intergenerational Transmission

Time preferences play an important role in economics. Among others, time preferences are responsible for the decision on how much people invest in human capital and schooling. For instance stronger preferences for present compared to future consumption may lead to underinvestment in schooling and may prevent success in school.

Recent studies provided initial empirical evidence that preferences and beliefs are transferred from generation to generation in a very specific and often precise way. For instance, risk attitudes towards health seem to be strongly correlated between parents and children, whereas parents’ willingness to take risk in health aspects seems to be not correlated to their children’s willingness to take risk in career aspects. Research gaps in understanding the intergenerational transmission of important preferences remain, such, it is little known about the specific intergenerational transmission concerning time preferences.

In this paper we contribute to the literature on intergenerational preference transmission by exploring the relationship of patience between mothers and their preschool children and focussing on differences between short-run and long-run patience. A new and straightforward procedure is proposed to assess and distinguish individual values of adults’ short-run and long-run patience. Based on this assessment the link between the short- and long-run patience of mothers and the intertemporal behaviour of their preschool children, measured in a shortrun patience paradigm, is examined.

In collaboration with the Socio-Economic Panel Study in Berlin (SOEP) and Institute for Empirical Research in Economics in Zürich (IEW) experimental data, called the mother-child pilot study, was collected to analysis the intergenerational transmission of time preferences. Children were asked to decide between an immediate available reward in the form of one bag of gummy bears or if they would opt instead for a larger but delayed reward, namely two bags of gummy bears. The mothers were asked to decide between receiving a certain amount of money immediately, and obtaining a larger but delayed available amount of money. While the children had to wait 47 minutes for the larger reward on average (i.e. the time it took to interview the mother), the mothers had to wait several months.

Based on a sample drawn from the mother-child pilot study, our findings demonstrate that mainly mother’s short-run patience is related to her preschool children’s ability to delay gratification. Thus the results contribute to improve the understanding of preference formation during childhood that should have long consequences for educational performance, among others.

Kosse, Fabian and Friedhelm Pfeiffer (2013), Quasi-hyperbolic Time Preferences and Their Intergenerational Transmission, ZEW Discussion Paper No. 13-002, Mannheim.