Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/200313 
Authors: 
Year of Publication: 
2018
Series/Report no.: 
IFS Working Papers No. W18/24
Publisher: 
Institute for Fiscal Studies (IFS), London
Abstract: 
Estimates of "present-bias" among the poor may be exaggerated if poor individuals are credit-constrained and expect to have greater liquidity in the future. I conduct an experiment in rural Pakistan which provides causal evidence of this effect. I use windfalls to generate fully exogenous variation in subjects' liquidity constraints. I show that fluctuating liquidity has a signifi cant and sizeable effect on measures of time-inconsistency, which does not operate via cognitive functioning. Importantly, I establish that the causation runs from tighter liquidity constraints to appearing "present-biased" rather than truly present-biased individuals making choices which lead to tighter liquidity constraints.
Document Type: 
Working Paper

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