Appendix A: Exploring the relationship of the SOEP proxy for present bias (impulsivity) and an experimental measure of present bias

Table 11 Correlation of impulsivity and experimental measure of present bias Full size table

In 2006, experiments were conducted with a subsample of the SOEP to elicit their time preferences. In the experiment that we rely upon for our experimental measure of present bias, 526 individuals were asked to indicate their 20 choices from 20 sets of two alternatives, where the alternatives differed in their level of payout and their payout period. The difference in the payout period was fixed at one month. In a first task, participants were presented with the option of either receiving 200 euros immediately or some payment x > 200 euros in one month. In a second task, the decision was between 200 euros in 12 months and some payment x > 200 euros in 13 months. The level of x took on 20 values that were presented in an ascending order and the subjects were asked to state their choice for each of the 20 sets of two alternatives (Richter and Schupp 2014). After the experiment, a randomly selected subgroup of participants (11%) received 200 euros or a random x > 200 euros depending on their choice in the experiment.

The set of alternatives at which individuals switch from preferring the sooner payment to preferring the later payment gives us their switching point and is interpreted as a point of indifference. We observe valid switching points for 374 participants aged 18 to 80 years. These switching points allow us to calculate an experimental measure of present bias. For illustration, suppose that an individual is indifferent between the 200 euros immediately and x euros in one month (i.e., that u(200) = βδu(x), where we use the notation from Footnote 2) and that this individual is indifferent between 200 euros in 12 months and y euros in 13 months (i.e., that u(200) = δu(y)). For this individual, we can infer β = u(y)/u(x).

In a next step, we use an ordinary least squares specification to estimate the correlation between the experimental measure of present bias and our survey proxy for present bias (i.e., the SOEP measure for impulsivity) using age, age squared, and gender as additional covariates. For a subset of 322 of the 374 experiment participants with valid switching points and information about the place of residence in 1989, the SOEP survey in 2008 contains information on our proxy for present bias. We find a significant correlation between our survey measure for present bias and the experimental measure of present bias. The correlation remains significant and nearly unchanged when we add age, age squared, gender, and survey information on patience and risk (see Table 11 for complete results). Tobit and robust regression exercises yield similar results. Considering only subjects that were FRG residents in 1989, we find that the results from the pooled sample re-emerge. Considering only subjects that were GDR residents in 1989, we find that the sign and the size of the coefficient remain intact. However, these coefficients are not statistically significant, which may be related to the very small number of observations.

Appendix B: Robustness checks

Table 12 Taking account of East-West migration before 1989: ordinary least squares regressions Full size table

Table 13 Taking account of East-West migration before 1989: GRDD regressions Full size table