02286cam a22002777 4500001000700000003000500007005001700012008004100029100002000070245015200090260006600242490004200308500001700350520103000367530006101397538007201458538003601530690011601566690008901682700002101771700002201792710004201814830007701856856003801933856003701971w13314NBER20140920062646.0140920s2007 mau||||fs|||| 000 0 eng d1 aLaibson, David.10aEstimating Discount Functions with Consumption Choices over the Lifecycleh[electronic resource] /cDavid Laibson, Andrea Repetto, Jeremy Tobacman. aCambridge, Mass.bNational Bureau of Economic Researchc2007.1 aNBER working paper seriesvno. w13314 aAugust 2007.3 aIntertemporal preferences are difficult to measure. We estimate time preferences using a structural buffer stock consumption model and the Method of Simulated Moments. The model includes stochastic labor income, liquidity constraints, child and adult dependents, liquid and illiquid assets, revolving credit, retirement, and discount functions that allow short-run and long-run discount rates to differ. Data on retirement wealth accumulation, credit card borrowing, and consumption-income comovement identify the model. Our benchmark estimates imply a 40% short-term annualized discount rate and a 4.3% long-term annualized discount rate. Almost all specifications reject the restriction to a constant discount rate. Our quantitative results are sensitive to assumptions about the return on illiquid assets and the coefficient of relative risk aversion. When we jointly estimate the coefficient of relative risk aversion and the discount function, the short-term discount rate is 15% and the long-term discount rate is 3.8%. aHardcopy version available to institutional subscribers. aSystem requirements: Adobe [Acrobat] Reader required for PDF files. aMode of access: World Wide Web. 7aD91 - Intertemporal Household Choice • Life Cycle Models and Saving2Journal of Economic Literature class. 7aE21 - Consumption • Saving • Wealth2Journal of Economic Literature class.1 aRepetto, Andrea.1 aTobacman, Jeremy.2 aNational Bureau of Economic Research. 0aWorking Paper Series (National Bureau of Economic Research)vno. w13314.4 uhttp://www.nber.org/papers/w1331441uhttp://dx.doi.org/10.3386/w13314