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Working Paper: Estimating Individual Discount Rates in Denmark: A Field Experiment

Paper Number: 2001-02

Document Date: 11/30/2001

Author(s): Glenn W. Harrison, Morten I. Lau and Melonie B. Williams

Subject Area(s): Economic Damages/Benefits

Keywords: discount rates; experimental economics; censored dependent variable; interval censored data; time consistency

Abstract: We estimate individual discount rates with respect to time streams of money using controlled laboratory experiments. These discount rates are elicited by means of field experiments involving real monetary rewards. The experiments were carried out across Denmark using a representative sample of 268 people between 19 and 75 years of age. Individual discount rates are estimated for various households differentiated by socio-demographic characteristics such as income and age. Our conclusions are that discount rates are constant over the 6month to 3-year horizons used in these experiments, that discount rates vary with respect to several socio-demographic variables, and that they decline with age after middle age. Hence we conclude that it would be reasonable to assume constant discount rates for specific household types, but not the same rates across all households.

Published: Harrison, Glenn W., Morten I. Lau and Melonie B. Williams. 2002. "Estimating Individual Discount Rates in Denmark: A Field Experiment ." American Economic Review, 92(5): 1606-1617.

This paper is part of the Environmental Economics Working Paper Series.

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