ESTIMATING TEMPTATION AND COMMITMENT OVER THE LIFE CYCLE

• 成果类型: Article
• 署名作者: Kovacs, Agnes; Low, Hamish; Moran, Patrick
• 署名单位: University of Manchester; University of Oxford; University of Copenhagen
• 刊物名称: INTERNATIONAL ECONOMIC REVIEW
• ISSN/ISSBN: 0020-6598
• DOI: 10.1111/iere.12491
• 发表日期: 2021
• 页码: 101-139
• 关键词: endogenous grid method; self-control; consumption growth; optimization; models; income

摘要

This article 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): 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.