Estimating Temptation and Commitment Over The Life‐cycle

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Standard

Estimating Temptation and Commitment Over The Life‐cycle. / Kovacs, Agnes; Low, Hamish; Moran, Patrick.

I: International Economic Review, Bind 62, Nr. 1, 2021, s. 101-139.

Publikation: Bidrag til tidsskrift › Tidsskriftartikel › Forskning › fagfællebedømt

Harvard

Kovacs, A, Low, H & Moran, P 2021, 'Estimating Temptation and Commitment Over The Life‐cycle', International Economic Review, bind 62, nr. 1, s. 101-139. https://doi.org/10.1111/iere.12491

APA

Kovacs, A., Low, H., & Moran, P. (2021). Estimating Temptation and Commitment Over The Life‐cycle. International Economic Review, 62(1), 101-139. https://doi.org/10.1111/iere.12491

Vancouver

Kovacs A, Low H, Moran P. Estimating Temptation and Commitment Over The Life‐cycle. International Economic Review. 2021;62(1):101-139. https://doi.org/10.1111/iere.12491

Author

Kovacs, Agnes ; Low, Hamish ; Moran, Patrick. / Estimating Temptation and Commitment Over The Life‐cycle. I: International Economic Review. 2021 ; Bind 62, Nr. 1. s. 101-139.

Bibtex

@article{26e8fd74d723428a80a77b05a23c7308,
title = "Estimating Temptation and Commitment Over The Life‐cycle",
abstract = "This paper estimates the importance of temptation for consumption smoothing and asset accumulation in a life‐cycle model. We use two complementary estimation strategies: first, we estimate the model‐implied Euler equation; second, we match liquid and illiquid wealth accumulation using the Method of Simulated Moments. In both cases, we find that the utility cost of temptation is one‐quarter of the utility benefit of consumption. Further, temptation is crucial for correctly estimating the elasticity of intertemporal substitution: EIS estimates are biased downward when ignoring temptation. Finally, the model only matches the share of illiquid wealth if temptation is in the preference specification.",
author = "Agnes Kovacs and Hamish Low and Patrick Moran",
year = "2021",
doi = "10.1111/iere.12491",
language = "English",
volume = "62",
pages = "101--139",
journal = "International Economic Review",
issn = "0020-6598",
publisher = "Wiley-Blackwell",
number = "1",

}

RIS

TY - JOUR

T1 - Estimating Temptation and Commitment Over The Life‐cycle

AU - Kovacs, Agnes

AU - Low, Hamish

AU - Moran, Patrick

PY - 2021

Y1 - 2021

N2 - This paper estimates the importance of temptation for consumption smoothing and asset accumulation in a life‐cycle model. We use two complementary estimation strategies: first, we estimate the model‐implied Euler equation; second, we match liquid and illiquid wealth accumulation using the Method of Simulated Moments. In both cases, we find that the utility cost of temptation is one‐quarter of the utility benefit of consumption. Further, temptation is crucial for correctly estimating the elasticity of intertemporal substitution: EIS estimates are biased downward when ignoring temptation. Finally, the model only matches the share of illiquid wealth if temptation is in the preference specification.

AB - This paper estimates the importance of temptation for consumption smoothing and asset accumulation in a life‐cycle model. We use two complementary estimation strategies: first, we estimate the model‐implied Euler equation; second, we match liquid and illiquid wealth accumulation using the Method of Simulated Moments. In both cases, we find that the utility cost of temptation is one‐quarter of the utility benefit of consumption. Further, temptation is crucial for correctly estimating the elasticity of intertemporal substitution: EIS estimates are biased downward when ignoring temptation. Finally, the model only matches the share of illiquid wealth if temptation is in the preference specification.

U2 - 10.1111/iere.12491

DO - 10.1111/iere.12491

M3 - Journal article

VL - 62

SP - 101

EP - 139

JO - International Economic Review

JF - International Economic Review

SN - 0020-6598

IS - 1

ER -

ID: 250487746