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Heritability of Overconfidence

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Author Info

  • David Cesarini
  • Magnus Johannesson
  • Paul Lichtenstein
  • Björn Wallace

Abstract

Empirical evidence suggests that people on average overestimate their own ability in a variety of circumstances. Little is known, however, about the origins of such overconfidence. To shed some light on this issue, we use the classic twin design to estimate the genetic and environmental contributions to individual differences in overconfidence. We collect data on overconfidence among 460 twin pairs. Overconfidence is measured as the difference between the perceived and actual rank in cognitive ability. Cognitive ability is measured using a 20-minute test of general intelligence. We find a highly significant joint effect of genes and common environment, but our estimates of the relative contributions of genetic and common environmental variation are less precise. According to our point estimates, genetic differences explain 16-34% of the variation in overconfidence depending on the definition of overconfidence used and common environmental differences explain 5-11%. (JEL: C91, D87, Z13) (c) 2009 by the European Economic Association.

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Bibliographic Info

Article provided by MIT Press in its journal Journal of the European Economic Association.

Volume (Year): 7 (2009)
Issue (Month): 2-3 (04-05)
Pages: 617-627

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Handle: RePEc:tpr:jeurec:v:7:y:2009:i:2-3:p:617-627

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Cited by:
  1. Filippin, Antonio & Paccagnella, Marco, 2011. "Family Background, Self-Confidence and Economic Outcomes," IZA Discussion Papers 6117, Institute for the Study of Labor (IZA).
  2. Hjalmarsson, Randi & Lindquist, Matthew J., 2011. "The Origins of Intergenerational Associations in Crime: Lessons from Swedish Adoption Data," Working Paper Series 11/2011, Swedish Institute for Social Research.
  3. Koellinger, Ph.D. & Treffers, T., 2012. "Joy leads to Overconfidence, and a Simple Remedy," ERIM Report Series Research in Management ERS-2012-001-STR, Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus Uni.
  4. Matthew Lindquist & Joeri Sol & Mirjam van Praag, 2012. "Why do Entrepreneurial Parents have Entrepreneurial Children?," Tinbergen Institute Discussion Papers 12-062/3, Tinbergen Institute, revised 30 Apr 2014.
  5. Stenberg, Anders, 2013. "Interpreting estimates of heritability – A note on the twin decomposition," Economics & Human Biology, Elsevier, vol. 11(2), pages 201-205.
  6. Philipp Koellinger & Matthijs Loos & Patrick Groenen & A. Thurik & Fernando Rivadeneira & Frank Rooij & André Uitterlinden & Albert Hofman, 2010. "Genome-wide association studies in economics and entrepreneurship research: promises and limitations," Small Business Economics, Springer, vol. 35(1), pages 1-18, July.
  7. Lundborg, Petter & Stenberg, Anders, 2009. "Nature, Nurture and Egalitarian Policy: What Can We Learn from Molecular Genetics?," IZA Discussion Papers 4585, Institute for the Study of Labor (IZA).

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