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Time Discounting and Economic Decision-making in the Older Population
David Huffman1, Raimond Maurer2, Olivia S Mitchell3
1Department of Economics, University of Pittsburgh, 4901 Wesley Posvar Hall, 230 South Bouquet Street, Pittsburgh PA 15260.
Journal of the Economics of Ageing
|October 22, 2020
Summary
Older Americans show varied time discounting, impacting financial decisions. Impatience correlates with lower wealth and health investments, while bequest motives suggest less impatience.
Area of Science:
- Gerontology
- Behavioral Economics
- Health Economics
Background:
- Understanding decision-making in older adults is crucial for economic and health policy.
- Time discounting, the perceived value of immediate versus future rewards, varies significantly across individuals.
Purpose of the Study:
- To investigate heterogeneity in time discounting among elderly Americans.
- To examine the association between time discounting patterns and key economic behaviors in later life.
Main Methods:
- Utilized a representative sample of elderly Americans to assess inter-temporal choices.
- Developed indicators from hypothetical choices comparing present and future payments.
- Correlated discounting measures with demographic, cognitive, and attitudinal factors.
Main Results:
- Cognitive deficits were linked to increased impatience (higher discount rates).
- Strong bequest motives were associated with decreased impatience (lower discount rates).
- Impatience correlated with reduced wealth, lower health investments, and less end-of-life care planning.
Conclusions:
- Time discounting heterogeneity is significant in the elderly population.
- Discounting behavior is influenced by cognitive status and legacy motivations.
- Impatience has tangible negative consequences on wealth accumulation, health, and future planning in older age.
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