IZA DP No. 4198: Present-Biased Preferences and Credit Card Borrowing
published in: American Economic Journal: Applied Economics, 2010, 2 (1), 193-210
Some individuals borrow extensively on their credit cards. This paper tests whether present-biased time preferences correlate with credit card borrowing. In a field study, we elicit individual time preferences with incentivized choice experiments, and match resulting time preference measures to individual credit reports and annual tax returns. The results indicate that present-biased individuals are more likely to have credit card debt, and have significantly higher amounts of credit card debt, controlling for disposable income, other socio-demographics, and credit constraints.