Abstract
Heterogeneity in inter-temporal preferences may reinforce the existing barriers to save and invest for rural population in developing countries. Despite the importance of discounting, little is known how it is formed.
We estimated discount rate for substantially varied sample of Ugandan villagers. Discount rate decreased with education and increased with age.
A convincing analysis of the causal link between education and discount rate requires an exogenous source of variation in schooling. We took advantage of varying school frequency in different villages and the Ugandan education reform in 1996 that abolished school fees on public primary schools.
By using these variables as instruments we found significant impact of education on discount rate. This finding underlines the role of education in development and is of obvious importance for policy.