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Individual discount rates and smoking: Evidence from a field experiment in Denmark

Lookup NU author(s): Professor Morten Lau

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Abstract

We elicit measures of individual discount rates from a representative sample of the Danish population and test two substantive hypotheses. The first hypothesis is that smokers have higher individual discount rates than non-smokers. The second hypothesis is that smokers are more likely to have time inconsistent preferences than non-smokers, where time inconsistency is indicated by a hyperbolic discounting function. We control for the concavity of the utility function in our estimates of individual discount rates and find that male smokers have significantly higher discount rates than male non-smokers. However, smoking has no significant association with discount rates among women. This result is robust across exponential and hyperbolic discounting functions. We consider the sensitivity of our conclusions to a statistical specification that allows each observation to potentially be generated by more than one latent data-generating process. (C) 2010 Elsevier B.V. All rights reserved.

Publication metadata

Author(s): Harrison GW, Lau MI, Rutstrom EE

Publication type: Article

Publication status: Published

Journal: Journal of Health Economics

Year: 2010

Volume: 29

Issue: 5

Pages: 708-717

Print publication date: 06/07/2010

ISSN (print): 0167-6296

ISSN (electronic): 1879-1646

Publisher: Elsevier BV

URL: http://dx.doi.org/10.1016/j.jhealeco.2010.06.006

DOI: 10.1016/j.jhealeco.2010.06.006

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