Time Preferences and Overconfident Beliefs: Evidence from Germany

Abstract

This paper investigates if and how time preferences are related to beliefs regarding one’s own future outcomes. We measure overconfident beliefs using the difference between an individual’s expected position and their observed percentile in the distribution of monthly gross wages one year after our survey. Our regression exercises link this bias measure to information about patience, conditioning on risk preferences, personality traits, cognitive ability, and the individual’s socio-economic status. On average, we find that greater patience is associated with lower overplacement in the future distribution of individual monthly gross wages.