Impatience and credit behavior: evidence from a field experiment
Abstract: This paper tests whether heterogeneity of time preferences can explain individual credit behavior. In a field experiment targeting individuals from low-to-moderate income households, we measure individual time preferences through choice experiments, and then match these time preference measures to individual credit reports and annual tax returns. ; We find that, controlling for disposable income and other individual characteristics, individuals who are less patient have lower credit scores and higher default rates. Moreover, people with dynamically inconsistent (quasi-hyperbolic) preferences have higher active borrowing levels.
Keywords: Consumer credit;
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Provider: Federal Reserve Bank of Boston
Part of Series: Working Papers
Publication Date: 2007