Download Patience and the Wealth of Nations

Patience and the Wealth of
Nations
Paper by: Thomas Dohmen, Benjamin
Enke, Armin Falk, David Huffman and
Uwe Sunde
01/2015
Topics in Behavioral and Experimental Economics
SS 2015
Presentation: Dominik Schaufler
Conceptual Framework
Source: Figure 1, Patience and the Wealth of Nation, p. 4
Hypotheses
• H1: At the aggregate level, patience exhibits a
positive reduced-form correlation with income
levels and income growth
• H2: Patience is correlated with proximate
determinants, in terms of both their levels and
corresponding accumulation processes. In
addition, none of the proximate determinants
alone fully captures the explanatory content of
patience with respect to national income.
Hypotheses
• H3: The positive reduced-form relationship
between patience and income, and the
association between patience and
accumulation decisions, extends to
disaggregate data at the regional and
individual level.
Data collection
• Global Preference Survey, 2012, 76 countries
• 4 noteworthy features:
– Preference measures obtained in a comparable
way
– Representative population samples
– Reflects geographical representativeness
– Experimental validated survey items
Measure of patience
• Quantitative: Staircase measure
– choice between hypothetical payment today or
payment in 1 year
– expressed in local currency
• Qualitative: self assessment on 11 point Scale 
how willing are you to give something up
(completely unwilling to do so – very willing to do
so)
• Linear combination makes up patience measure
• Patience = 0.711 Staircase measure + 0,288 Qualitative measure
World map of patience
Source: Figure 2, Patience and the Wealth of Nation
Source: Table 1,
Patience and the
Wealth of Nation
Sub Samples and Additional measures
• Patience and Effect on Continents  odes the
relationship exist within continents?
– Patience explains around 40% of the variation within
continents (Continents, OECD, Colonized)
• Alternative measures
– GDP/worker, HDI, subjective statements of well being
•  relationship not restricted to GDP/capita as
measure.
Measuring Preferences
Unobserved factors?
• 3 potential problematic areas:
– Financial environment in terms of inflation,
interest rate, borrowing constraints
– Context or culture specific interpretations
– Systematic shortcuts due to cognitive limitations
Historical Income and growth rates
• If deep cultural roots there should be
persistence over time
– historical prediction should be possible
– Account for population flows
• Higher steady state but also faster growth?
– 1820, 1870, 1925, 1950, 1975, 2010
• Unconditional correlation
• Control for log per capita and continent fixed effects
Role of proximate determinants
• Can any single proximate determinant fully
account for the relationship between patience
and national income?
– Patience and physical Capital (about a third of the
variation explained)
– Patience and Human Capital (about 40% of
variation explained)
Patience, factor productivity and
institutions
Total factor productivity, R&D expenditures as % of
GDP, # Researchers in R&D, Global innovation index
Not only accumulation of factors but also
relevant for accumulation of knowledge +
productivity
Institutions: democratic quality, property rights,
social infrastructure index, S&P long term credit
rating
Patience is a strong correlate of democracy, property
rights and social infrastructure
Condition on proximate determinants
• Relationship should weaken if conditioned on
proximate determinants
• it does, but patience remains significant
• No proximate determinate alone fully
accounts for explanatory content of patience
Patience within Countries
• (3rd Hypotheses)
– Regional level (55 countries, 712 regions)
• H3 confirmed, regions are influenced by different levels
of patience
– Individual level
• Within countries more patient people tend to be richer
and have a higher education.
• Relationship holds at the individual level
Conclusion
• No identification of causal effects
• Existence of third factors?
• Reverse causality?
• Framework with time preference as relevant
driver empirically validated.
Thank you
Source: Table 1,
Patience and the
Wealth of Nation
Sub-Samples
Source: Table 2, Patience and the Wealth of Nation, p. 4
Alternative measures
Source: Table 3, Patience and the Wealth of Nation, p. 4
Historical income
Growth rates in the past 200 years
Patience and phsyical capital
Patience and human capital
Patience and productivity
Patience and institutions
Patience and proximate determinants
Regional patience
Individual patience