Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/91581
Authors: 
Meissner, Thomas
Year of Publication: 
2013
Series/Report no.: 
SFB 649 Discussion Paper 2013-045
Abstract: 
This paper tests how subjects behave in an intertemporal consumption/saving experiment when borrowing is allowed and whether subjects treat debt differently than savings. Two treatments create environments where either saving or borrowing is required for optimal consumption. Since both treatments share the same optimal consumption levels, actual consumption choices can be directly compared across treatments. The experimental findings imply that deviations from optimal behavior are higher when subjects have to borrow than when they have to save in order to consume optimally, suggesting debt-aversion. Signifiant underconsumption is observed when subjects have to borrow in order to reach optimal consumption. Only weak evidence is found suggesting that subjects over-consume when saving is necessary for optimal consumption.
Subjects: 
Laboratory Experiment
Intertemporal Consumption
Consumption Smoothing
Debt Aversion
JEL: 
C91
D81
E21
Document Type: 
Working Paper

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