R&R at the Journal of Public Economics | with Karan Makkar
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PDFIn an incentivized survey experiment, we investigate whether a representative sample's behavior is consistent with the standard approach to the intergenerational social discount rate. In three separate modules, respondents allocate resources between two people of the same age at different points in time, between time periods for the same person, and between time periods for themselves. We find that respondents consistently discount future consumption less when deciding across people than when deciding for themselves or another person. The divergence among respondents' discount rates and with actual interest rates raises theoretical issues, such as potential arbitrage opportunities and inconsistent treatment of members of different age groups. When confronted with these issues, respondents are insensitive to efficiency considerations that dominate the traditional economic approach to the social discount rate. Respondents' political beliefs, donation choices, and longer-term decisions are consistent with a significant divergence between respondents' preferences for intergenerational equity and the conventional welfarist treatment of intertemporal choice.
with Ben Grodeck, Oliver Hauser, and Johannes Lohse
+/- Abstract
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PDFIn both families and states, pay-it-forward schemes — where one cohort invests in the next (e.g., via education) with the expectation of future returns (e.g., via retirement support) — play a crucial role. However, the upfront costs of such schemes and the uncertainty of future returns raise questions about the extent to which they can be sustained through private contributions. We investigate, through a theoretically motivated experiment, whether altruism, reciprocity, and self-interest can motivate forward investments. Specifically, we conduct a large-scale online experiment in which an overlapping sequence of players (representative generations) allocate an endowment between themselves and future, prior, or contemporary players. By varying both the action set and information available, we disentangle the mechanisms driving forward investments. We find that the ability to give back significantly increases willingness to give forward, even without information that would allow players to condition their actions on past behavior. This suggests that a preference for implicit reciprocity, rather than self-interested tit-for-tat strategies or explicit reciprocity, underlies this behavior.
