Patience and Comparative Development

Uwe Sunde*, Thomas Dohmen, Benjamin Enke, Armin Falk, David Huffman, Gerrit Meyerheim

*Corresponding author for this work

Research output: Contribution to journalArticleAcademicpeer-review

Abstract

This paper studies the relationship between patience and comparative development through a combination of reduced-form analyses and model estimations. Based on a globally representative dataset on time preference in 76 countries, we document two sets of stylized facts. First, patience is strongly correlated with per capita income and the accumulation of physical capital, human capital and productivity. These correlations hold across countries, subnational regions, and individuals. Second, the magnitude of the patience elasticity strongly increases in the level of aggregation. To provide an interpretive lens for these patterns, we analyze an OLG model in which savings and education decisions are endogenous to patience, aggregate production is characterized by capital-skill complementarities, and productivity implicitly depends on patience through a human capital externality. In our model estimations, general equilibrium effects alone account for a non-trivial share of the observed amplification effects, and an extension to human capital externalities can quantitatively match the empirical evidence.
Original languageEnglish
Pages (from-to)2806-2840
JournalReview of Economic Studies
Volume89
Issue number5
Early online dateNov 2021
DOIs
Publication statusPublished - Oct 2022

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