Time and Risk Preferences, and Consumption Decisions of Patients with Clinical Depression

Abstract

Clinical depression has significant influence on an individual’s behavior and decision making. This study examines how depression affects the economic decision making of individuals with clinical depression, looking specifically at time preference (subjective discount rate), attitude toward risk, and economic conduct. For this purpose, structured questionnaires were distributed to patients with clinical depression at the Be’er Sheva Mental Health Center and a control group of similar size, and with similar demographic characteristics. The questionnaire included questions for assessing the level of depression (processed by a physician), and questions on economic conduct, time preference, and risk preference. The study found that the participants’ level of depression correlated with their economic decisions, time preference and economic conduct, and that there is a significant gap in many aspects of economic decision making between individuals with different levels of depression, and healthy individuals. On one measure of risk preference, individuals with depression showed signs of taking more risks, but there was no uniform trend indicating a disparity between individuals with depression and healthy individuals in other measures of risk preference. Our main conclusion is that clinical depression has broad, significant impact on the economic decisions of those who suffer from it, and it may harm the short- and long-term economic situation of patients. In light of the above, it is important that individuals with depression, their relatives and therapists be aware of this tendency, and take it into consideration when recommending rehabilitation and social programs.

Keywords: clinical depression, time preference, risk preference, economic decision

JEL Classification: I12, G41