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Economists have recently argued that time inconsistency may play a central role in explaining inter-temporal behavior, particularly among poor households. However, time-preference parameters are typically not identified in standard dynamic choice models and little is known about the fraction of inconsistent agents in the population. We formulate a dynamic discrete choice model in an unobservedly heterogeneous population of possibly time-inconsistent agents. We show that given two exclusion restrictions, both agents’ time preferences and population type probabilities are separately identified. Using specifically collected information combined with a field intervention in rural India, we estimate all time-preference parameters as well as the population fractions of time-consistent and “naive” and “sophisticated” time-inconsistent agents, and provide counterfactual policy simulations.
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