Description:
Financial development plays a key role in economic growth, but there is limited research on how greater access to financial services affects households’ intertemporal choices. By conceptualizing intertemporal choices into utility maximization problems, this study shows that such choices are guided by interest rates when individuals freely access banking services and reflect underlying time preference parameters when individuals are credit constrained. This study is the first to empirically examine the effect of greater financial inclusion on intertemporal choices using longitudinal data. Analyzing individual panel data derived from Indonesian Family Life Survey during a rapid expansion of bank branches to rural villages, I find that expansions of commercial bank branch significantly reduces residents’ propensity to wait, mainly through the mechanism of increasing access to savings but not borrowings. This study can contribute to interpretations of intertemporal choices and understandings of myopic behaviors in developing countries