Wednesday, April 18, 2012
Bray Theory Workshop
Revising Commitments: Field Evidence on the Adjustment of Prior Choices
Dan Silverman, Associate Professor, University of Michigan
The very poor in developing countries often make important inter temporal choices that seem at odds with their individual self-interest. There are many possible reasons why. We investigate several sources via a lab-in-the-field experiment in rural Malawi with large real stakes. We make two key contributions. First, we construct a new dependent variable: later revisions prior choices regarding the allocation of future income. This allows us to directly examine inter temporal choice revision and its determinants. In particular this dependent variable permits a novel test for the existence of self-control problems: we find that revisions of money allocations toward the present are positively associated with measures of present-bias from an earlier baseline survey, as well as the (explicitly randomized) closeness in time to the first possible date of money disbursement. Second, we investigate other potential determinants of revision, aside from self-control problems. Revisions of money allocations toward the present are positively associated with spousal preferences for such revision, but not with household shocks or the financial sophistication of respondents.