Expropriation risk and discounting

This paper focuses on time preference and individual measures of expropriation risk. We use survey data on Italian households and on the 50+ population in eleven European countries. The surveys provide measures of discount rate and proxies for expropriation due to criminal offenses. We show that impatience increases with expropriation risk.

► We provide measures of impatience and expropriation risk using Italian and cross-country micro-data. ► We investigate the relation between impatience and expropriation risk. ► Both the Italian and the cross-country data show that impatience increases with expropriation risk. ► To rationalize this finding, we provide a model where preferences are allowed to be affected by risk. ► We show that there can exist a configuration of model's parameters, which can account for the empirical results.