Why Chinese discount future financial and environmental gains but not losses more than Americans
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Understanding country differences in temporal discounting is critical for extending incentive-based environmental policies successfully from developed countries to developing countries. We examined differences between Chinese and Americans in discounting of future financial and environmental gains and losses. In general, environmental use value was discounted significantly more than the monetary values, but environmental existence value was discounted similarly to the monetary values. Confirming previous research, we found that participants discounted gains significantly more than losses. Furthermore, there was a significant interaction between culture and gain/loss outcome: Chinese discounted gains but not losses in both outcome categories more than Americans. Open-ended comments suggest that respondents focused on the uncertainty and foregone returns associated with waiting for future rewards when discounting gains, but focused on the magnitude of the losses and the psychology cost of carrying debts when discounting losses.
KeywordsTemporal discounting Cross-cultural differences Uncertainty Environmental decisions China
JEL ClassificationsD81 D91
We appreciate helpful comments and suggestions from David Aadland, Jonathan Baron, Geoffrey Heal, Howard Kunreuther, Sabine Max, Ben Orlove, and participants at the CRED lab meetings and Altisource research seminars. We thank Columbia Business School Behavior Lab and the Wharton Behavior Lab, Amy Shi, Matthew Sisco, and Yi Wang for collecting and compiling the data. We also wish to thank Kip Viscusi for his constructive feedback and advice on an earlier version of the paper. This project was funded by the cooperative agreement NSF SES-0951516 awarded to the Center for Research on Environmental Decisions, and additionally by the award NSF SES-0820496.
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