Chronicles of Choice: Survey Insights into Intertemporal Preferences

Abstract

This study uses data from the 2020 Survey on Household Income and Wealth (SHIW) conducted by the Bank of Italy to investigate the determinants of individuals’ time-discounting behaviour, which plays a crucial role in economic decision-making. We explore the idea that financial literacy could mitigate higher discount rates, which usually lead to irrational behaviour. Our findings confirm this hypothesis, showing that individuals with a better grasp of compounded interest reduce their discount rates significantly. However, other aspects of financial literacy, such as inflation and risk diversification, do not affect discount rate preferences. We also consider the impact of the COVID-19 pandemic, finding that support measures may increase discount rates, possibly due to the heightened financial stress experienced by recipients.