Measuring Time Preference and the Elasticity of Intertemporal Substitution Miles S. Kimball, Claudia R. Sahm and Matthew D. Shapiro September 7, 2006 Michigan-Rand Internet Survey Conference

Previous Survey Measures HRS 1992 Module K, N = 198 – Analyzed by Barsky, Kimball, Juster, and Shapiro (QJE 1997) HRS 1999 Mailout, N = 1,210 – Similar content to internet survey – No randomization in question screen

Behavioral Model Where c is consumption, r is the real interest rate, s is the elasticity of intertemporal substitution, and ρ is the subjective discount rate.

MS Internet Survey Wave 2 (Fall 2004) Measures of Time Preference and IES: Choose from static pairs –4 Questions vary interest rate, N = 276 Move bars to create consumption pair –4 Questions vary interest rate, N = 150 –5 Questions vary length of period, N = ??

Series Introduction - Static Pairs - Series includes four scenarios

Question Introduction The annual real interest rate is 0% above Sequence of r = {0%, 5%, 9%, 13%} is random

Question Choices Growth rate at choice C is randomly assigned Left-to-right pattern is randomly assigned

Response Rates

Consumption Growth at 0% Interest Rate Note: Tabulations use the annual consumption growth rate of the first choice pair. Respondents in the second and third column face the same set of choices.

Consumption Growth at Positive Interest Rates - Internet Note: The consumption growth rate at r=0% is subtracted off.

Consumption Growth at Positive Interest Rates - Mail Note: The consumption growth rate at r=0% is subtracted off.

Importance of Response Error Model and Multiple Questions Note: Tabulations include respondents with four responses and the first column excludes the expansion screens.