Thesis topic: Poverty and Self - control (Bernheim, b. D., Ray, D., & Yeltekin, s., Econometrica, 2015, 83 (5) : 1877-1911.)

Time: Friday, March 15, 2019 12:00-13:30

Location: Room 610, Mingde Main Building

Speaker: Wei Ning, 2018 graduate student of Renmin University of China

Abstract: The absence of self-control is often viewed as an important correlate of persistent poverty. Usinga standard intertemporal allocation problem with credit constraints faced by an individual with quasi-hyperbolic preferences, we argue that poverty damages the ability to exercise self-control.Our theory invokes George Ainslie’s notion of “personal rules,” interpreted as subgame-perfect equilibria of an intrapersonal game played by a time-inconsistent decision maker. Our main result pertains to situations in which the individual is neither so patient that accumulation is possible from every asset level, nor so impatient that decumulation is unavoidable from every asset level. Such cases always possess a threshold level of assets above which personal rules support unbounded accumulation, and a second threshold level of assets below which there is a “poverty trap”: no personal rule permits the individual to avoid depleting all liquid wealth. In short, poverty perpetuates itself by undermining the ability to exercise self-control. Thus policies designed to help the poor accumulate assets may be highly effective, even if they are temporary. We also explore the implications for saving with easier access to credit, the demand for commitment devices, the design of accounts to promote saving, and the variation of the marginal propensity to consume across classes of resource claims.

Moderator: Associate Professor Liu Xiaolu

The Finance Literature Seminar is sponsored by the Department of Finance, School of Finance and Finance, Renmin University of China. The graduate students of the Department of Finance analyze the classic or frontier literature of finance, and form theoretical thoughts and systematic views on hot issues in the field of finance. The main topics of the seminar include: government behavior, fiscal system, tax system and macro economy.