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Why Chinese discount future financial and environmental gains but not losses more than Americans

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Abstract

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.

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Notes

  1. This scenario is similar to one of the scenarios used in Hardisty and Weber (2009).

  2. Appendix A is available at: http://www.columbia.edu/~mg3030/Discounting%20Appendix%20A.pdf.

  3. Reality of Limits to Growth measures “attitudes regarding the reality of the limits of growth in the environment”; Antianthropocentricism measures “the belief that nature exists primarily for human use and has no inherent value of its own”; Fragility of Nature’s Balance measures “attitudes towards the fragility of nature’s balance”; Rejection of Exemptionalism measures “attitudes towards the rejection of exemptionalism”; Possibility of Ecocrisis measures “attitudes towards the possibility of an ecocrisis”. (Conpsychmeasures.com 2012)

  4. We dropped the outliers that were greater than 3 standard deviations. Out of the 1,171 values from all participants, 26 outliers were dropped and treated as missing values in the analyses.

  5. In most scenarios, we used the same number in U.S. Dollars and Chinese Yuan because they represented the local prices in those scenarios. In the self-inflicted money loss scenario, however, we used the exchange rate because the item had similar prices in the two countries.

  6. Hausman’s test indicates that the random effect estimators are consistent and efficient (χ2(8) = 7.76, p > 0.05).

  7. We ran multiple regression models to alternate the dropped values to test different interactions.

  8. The personal saving rate in the United States was 4.5% as of August 2011 (Bureau of Economic Analysis 2011).

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Acknowledgments

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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Authors and Affiliations

  1. RAND Corporation, 4570 Fifth Ave, Suite 600, Pittsburgh, PA, 15206, USA

    Min Gong

  2. Center for Research on Environmental Decisions, Columbia University, 406 Schermerhorn Hall-MC 5501, 1190 Amsterdam Ave, New York, NY, 10027, USA

    Min Gong, David H. Krantz & Elke U. Weber

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  1. Min Gong
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Correspondence to Min Gong.

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Gong, M., Krantz, D.H. & Weber, E.U. Why Chinese discount future financial and environmental gains but not losses more than Americans. J Risk Uncertain 49, 103–124 (2014). https://doi.org/10.1007/s11166-014-9200-5

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