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The Age of Reason: Financial Decisions Over the Lifecycle

Author

Listed:
  • Sumit Agarwal
  • John C Driscoll
  • Xavier Gabaix
  • David Laibson
Abstract
In cross-sectional data sets from ten credit markets, we find that middle-aged adults borrow at lower interest rates and pay fewer fees relative to younger and older adults. Fee and interest payments are minimized around age 53. The measured effects are not explained by observed risk characteristics. We discuss several leading factors that may contribute to these effects, including age-related changes in experience and cognitive function, selection effects, and cohort effects.
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Suggested Citation

  • Sumit Agarwal & John C Driscoll & Xavier Gabaix & David Laibson, 2007. "The Age of Reason: Financial Decisions Over the Lifecycle," Levine's Bibliography 122247000000001752, UCLA Department of Economics.
    • Handle: RePEc:cla:levrem:122247000000001752
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    References listed on IDEAS

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    More about this item

    JEL classification:

    • D1 - Microeconomics - - Household Behavior
    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty
    • G2 - Financial Economics - - Financial Institutions and Services
    • J14 - Labor and Demographic Economics - - Demographic Economics - - - Economics of the Elderly; Economics of the Handicapped; Non-Labor Market Discrimination

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