Present-Biased Preferences and Credit Card Borrowing

Abstract (via Meier & Sprenger )

Some individuals borrow extensively on their credit cards. This paper tests whether present-biased time preferences correlate with credit card borrowing. In a field study, we elicit individual time preferences with incentivized choice experiments, and match resulting time preference measures to individual credit reports and annual tax returns. The results indicate that present-biased individuals are more likely to have credit card debt, and to have significantly higher amounts of credit card debt, controlling for disposable income, other socio-demographics, and credit constraints.

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23. March 2010 by Miguel Barbosa
Categories: Behavioral Economics, Curated Readings | Leave a comment

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