Skip to Main Content
HBS Home
  • About
  • Academic Programs
  • Alumni
  • Faculty & Research
  • Baker Library
  • Giving
  • Harvard Business Review
  • Initiatives
  • News
  • Recruit
  • Map / Directions
Faculty & Research
  • Faculty
  • Research
  • Featured Topics
  • Academic Units
  • …→
  • Harvard Business School→
  • Faculty & Research→
Publications
Publications
  • 2020
  • Working Paper
  • HBS Working Paper Series

Income Volatility Increases Financial Impatience

By: Colin West, A.V. Whillans and Sanford DeVoe
  • Format:Print
  • | Language:English
  • | Pages:53
ShareBar

Abstract

Using a multi-method approach, we investigate whether income volatility is associated with financial impatience—the preference to receive a small sum of money immediately over a larger sum of money later. We find that experiencing more income volatility—including a higher frequency of either income dips or spikes – is associated with greater financial impatience. Using longitudinal data on biannual income, Study 1 demonstrates that this effect operates above and beyond individual differences in income risk preferences and wealth. Study 2 conceptually replicates these correlational findings with recent month-to-month income volatility and finds that this effect occurs primarily among people who report having little control over their finances. Using a longitudinal field experimental with low-income working women, Study 3 tests for a causal effect of an externally-induced spike in monthly income on changes in financial impatience. In a pre-post test experimental design, participants randomly assigned to receive cash transfers amounting to a median monthly income spike of 29% exhibit significantly greater financial impatience compared to a control condition in which participants receive no cash transfers. We conclude by discussing the implications of these findings for employers and policymakers.

Keywords

Income Volatility; Compensation; Impatience; Time Preferences; Income; Personal Finance; Behavior; Demographics; Policy

Citation

West, Colin, A.V. Whillans, and Sanford DeVoe. "Income Volatility Increases Financial Impatience." Harvard Business School Working Paper, No. 21-053, October 2020.
  • Read Now

About The Author

Ashley V. Whillans

Negotiation, Organizations & Markets
→More Publications

More from the Authors

    • March 29, 2021
    • Harvard Business Review (website)

    Research: A Little Recognition Can Provide a Big Morale Boost

    By: Shibeal O'Flaherty, Michael Sanders and Ashley V. Whillans
    • 2021
    • Faculty Research

    Extension Request Avoidance Increases Time Stress among Women

    By: Ashley V. Whillans, Jaewon Yoon, Aurora Turek and Grant E. Donnelly
    • March 23, 2021
    • Proceedings of the National Academy of Sciences

    A Multicountry Perspective on Gender Differences in Time Use During COVID-19

    By: Ashley V. Whillans, Laura M. Giurge and Ayse Yemiscigil (shared authorship)
More from the Authors
  • Research: A Little Recognition Can Provide a Big Morale Boost By: Shibeal O'Flaherty, Michael Sanders and Ashley V. Whillans
  • Extension Request Avoidance Increases Time Stress among Women By: Ashley V. Whillans, Jaewon Yoon, Aurora Turek and Grant E. Donnelly
  • A Multicountry Perspective on Gender Differences in Time Use During COVID-19 By: Ashley V. Whillans, Laura M. Giurge and Ayse Yemiscigil (shared authorship)
ǁ
Campus Map
Harvard Business School
Soldiers Field
Boston, MA 02163
→Map & Directions
→More Contact Information
  • Make a Gift
  • Site Map
  • Jobs
  • Harvard University
  • Trademarks
  • Policies
  • Digital Accessibility
Copyright © President & Fellows of Harvard College