The early childhood determinants of time preferences

Abstract

Research on time preference formation and socioeconomic differences in discounting has received little attention to date. This article examines the extent to which early childhood differences emerge in measures of hyperactivity, impulsivity and persistence, all of which are good psychometric analogues to how economists conceptualise discounting. We examine the distribution of these traits measured at age three across parental social class and analyse the extent to which different mechanism plausibly generate the observed social class distribution. In addition, we control for a wide ranging of potentially mediating factors including parental investment and proxies for maternal time preferences. Our results show substantial social class variations across all measures. We find only weak evidence that this relates to differential maternal time preferences (e.g. savings behaviour, abstaining from smoking) but relatively stronger evidence that these traits are transmitted through the parents own non-cognitive skill set (self-esteem, attachment etc.) and parental time investments (e.g. time spent reading to the child and teaching the child to write, sing etc.).