DP10122 The Agricultural Origins of Time Preference

Author(s): Oded Galor, Ömer Özak
Publication Date: August 2014
Keyword(s): agriculture, culture, delayed gratification, economic development, economic growth, evolution, time preference
JEL(s): O1, O4, Z1
Programme Areas: International Macroeconomics, Economic History
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=10122

This research explores the origins of the distribution of time preference across regions. It advances the hypothesis, and establishes empirically, that geographical variations in natural land productivity and their impact on the return to agricultural investment have had a persistent effect on the distribution of long-term orientation across societies. In particular, exploiting a natural experiment associated with the expansion of suitable crops for cultivation in the course of the Columbian Exchange, the research establishes that agro-climatic characteristics in the pre-industrial era that were conducive to higher return to agricultural investment, triggered selection and learning processes that had a persistent positive effect on the prevalence of long-term orientation in the contemporary era. This research explores the origins of the distribution of time preference across regions. It advances the hypothesis, and establishes empirically, that geographical variations in the incentives to delay consumption in favor of lucrative investment opportunities have had a persistent effect on the distribution of long-term orientation across societies. In particular, exploiting a natural experiment associated with the Columbian Exchange, the research establishes that agro-climatic characteristics in the pre-industrial era that were conducive to higher return to agricultural investment, triggered selection and learning processes that had a persistent positive effect on the prevalence of long-term orientation in the contemporary era.