Commitments in Marriage and Under-savings

We examine whether or not married individuals who exhibit hyperbolic time discounting and leave their saving decision to their spouses are more likely to save close to the amount of financial asset they would have wanted to save. Our analysis is cross-sectional using the micro-data of married Japanese couple from waves 2008 and 2009 of the Preference Parameters Study of Osaka University. Our estimation results are as follows: for the wives who exhibit hyperbolic discounting the ratio of the balance of financial assets of their entire household to the amount of entire household’s financial assets the respondent would have wanted to save until now is approximately 11.6 percentage more than when the wives discuss together but their husband decide than when they decide. We conclude that wives with time inconsistent preference face serious self control problems. The wives are so sophisticated that they discuss with their husband and leave the decisions on savings and investments to their husbands. They can avoid temptation to spend too much and achieve their target savings.