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Myopic preferences or subsistence income? Why do rickshaw cyclists rent the cycle?

Author

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  • Magnus Hatlebakk
Abstract
One year rent is sufficient to buy a rickshaw in the plains of Nepal, while a rickshaw will last many years, so purchase appears very profitable. Still most cyclists rent the rickshaw. Based on choices made by rickshaw pullers between hypothetical financing schemes for rickshaws we investigate whether the explanation is a high time-preference rate or a high elasticity of the marginal utility of consumption, which in turn can be explained by preferences that are formed by consumption near a subsistence level. We find that subsistence constraints are more important than myopic preferences.

Suggested Citation

  • Magnus Hatlebakk, 2012. "Myopic preferences or subsistence income? Why do rickshaw cyclists rent the cycle?," CMI Working Papers 1, CMI (Chr. Michelsen Institute), Bergen, Norway.
    • Handle: RePEc:chm:wpaper:wp2012-1
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    File URL: https://www.cmi.no/publications/file/4368-myopic-preferences-or-subsistence-income.pdf
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    References listed on IDEAS

    as
    1. Pender, John L., 1996. "Discount rates and credit markets: Theory and evidence from rural india," Journal of Development Economics, Elsevier, vol. 50(2), pages 257-296, August.
    2. Robert H. Frank, 2005. "Positional Externalities Cause Large and Preventable Welfare Losses," American Economic Review, American Economic Association, vol. 95(2), pages 137-141, May.
    3. Masao Ogaki & Andrew Atkeson, 1997. "Rate Of Time Preference, Intertemporal Elasticity Of Substitution, And Level Of Wealth," The Review of Economics and Statistics, MIT Press, vol. 79(4), pages 564-572, November.
    4. Magnus Hatlebakk, 2009. "Capacity‐constrained Collusive Price Discrimination in the Informal Rural Credit Markets of Nepal," Review of Development Economics, Wiley Blackwell, vol. 13(1), pages 70-86, February.
    5. Juan Camilo Cardenas & Jeffrey Carpenter, 2008. "Behavioural Development Economics: Lessons from Field Labs in the Developing World," Journal of Development Studies, Taylor & Francis Journals, vol. 44(3), pages 311-338.
    Full references (including those not matched with items on IDEAS)

    Citations

    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Are rickshaw pullers myopic?
      by Economic Logician in Economic Logic on 2012-04-17 19:54:00

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    Cited by:

    1. Espen Villanger, 2015. "Entrepreneurial Abilities and Barriers to Microenterprise Growth: A Case Study in Nepal," Journal of Entrepreneurship and Innovation in Emerging Economies, Entrepreneurship Development Institute of India, vol. 24(2), pages 115-147, September.
    2. Soldatos, Gerasimos T., 2015. "Law, Coercion, And Socioeconomic Equilibrium," MPRA Paper 68953, University Library of Munich, Germany.
    3. Gerasimos T. SOLDATOS, 2015. "Law, Coercion And Socioeconomic Equilibrium," Review of Economic and Business Studies, Alexandru Ioan Cuza University, Faculty of Economics and Business Administration, issue 16, pages 39-50, December.
    4. Magnus Hatlebakk, 2014. "Poverty Dynamics in Rural Orissa: Transitions in Assets and Occupations over Generations," Journal of Development Studies, Taylor & Francis Journals, vol. 50(6), pages 877-893, June.

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    Keywords

    Investment behavior; Poverty; Time-preferences;
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