Working Paper

Do Discount Rates Change over Time?: Experimental Evidence from Ethiopia

Mar 7, 2008 | Heather Klemick, Mahmud Yesuf

This was created in partnership with Environment for Development .


This study tests the hyperbolic discounting hypothesis using real-payoff experiments in Ethiopia. We compared time preferences over cash and consumption goods and over different time horizons. We found that participants made consistent choices over time and that responses did not vary across payment type. However, participants offered an immediate payment option first selected the impatient reward more often than those offered a delayed payment initially. Participants with greater livestock wealth and smaller landholdings were more likely to select the patient reward.