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Self-Esteem and Earnings

  • Drago, Francesco

    ()

    (University of Naples Federico II)

Recent research in economics suggests a positive association between self-esteem and earnings. A major problem in this literature is that from simple cross-sectional wage regressions it is not possible to conclude that self-esteem has a causal impact on earnings. While classical measurement error leads to an attenuation bias, reverse causality and omitted variable are likely to drive the OLS coefficient on self-esteem upward. Using the National Longitudinal Survey of Youth (NLSY) that administered the Rosenberg Self-Esteem Scale during the 1980 and 1987 interviews, I provide further evidence for the existence of a self-esteem premium by exploiting variation in these measures in the two years. I show that the estimated impact of self-esteem in 1987 on earnings is about two times greater than previous OLS estimates would imply. The main explanation for this result is the large extent of measurement error in the reported self-esteem measure.

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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 3577.

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Length: 23 pages
Date of creation: Jul 2008
Date of revision:
Handle: RePEc:iza:izadps:dp3577
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  1. Olivier Compte & Andrew Postlewaite, 2003. "Confidence-Enhanced Performance," PIER Working Paper Archive 03-009, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania.
  2. Goldsmith, Arthur H & Veum, Jonathan R & Darity, William, Jr, 1997. "The Impact of Psychological and Human Capital on Wages," Economic Inquiry, Western Economic Association International, vol. 35(4), pages 815-29, October.
  3. Nicola Persico & Andrew Postlewaite & Dan Silverman, 2004. "The Effect of Adolescent Experience on Labor Market Outcomes: The Case of Height," Journal of Political Economy, University of Chicago Press, vol. 112(5), pages 1019-1053, October.
  4. Graham, Carol & Eggers, Andrew & Sukhtankar, Sandip, 2004. "Does happiness pay?: An exploration based on panel data from Russia," Journal of Economic Behavior & Organization, Elsevier, vol. 55(3), pages 319-342, November.
  5. Giorgio Brunello & Beatrice d'Hombres, 2006. "Does Body Weight affect Wages? Evidence from Europe," "Marco Fanno" Working Papers 0027, Dipartimento di Scienze Economiche "Marco Fanno".
  6. James J. Heckman & Jora Stixrud & Sergio Urzua, 2006. "The Effects of Cognitive and Noncognitive Abilities on Labor Market Outcomes and Social Behavior," NBER Working Papers 12006, National Bureau of Economic Research, Inc.
  7. Lu�s Santos-Pinto & Joel Sobel, 2005. "A Model of Positive Self-Image in Subjective Assessments," American Economic Review, American Economic Association, vol. 95(5), pages 1386-1402, December.
  8. Erik Lindqvist & Roine Vestman, 2011. "The Labor Market Returns to Cognitive and Noncognitive Ability: Evidence from the Swedish Enlistment," American Economic Journal: Applied Economics, American Economic Association, vol. 3(1), pages 101-28, January.
  9. Roland Bénabou & Jean Tirole, 2002. "Self-Confidence And Personal Motivation," The Quarterly Journal of Economics, MIT Press, vol. 117(3), pages 871-915, August.
  10. Melissa Osborne & Herbert Gintis & Samuel Bowles, 2001. "The Determinants of Earnings: A Behavioral Approach," Journal of Economic Literature, American Economic Association, vol. 39(4), pages 1137-1176, December.
  11. Glen R. Waddell, 2006. "Labor-Market Consequences of Poor Attitude and Low Self-Esteem in Youth," Economic Inquiry, Western Economic Association International, vol. 44(1), pages 69-97, January.
  12. Sendhil Mullainathan & Marianne Bertrand, 2001. "Do People Mean What They Say? Implications for Subjective Survey Data," American Economic Review, American Economic Association, vol. 91(2), pages 67-72, May.
  13. Nicola Persico & Andrew Postlewaite & Dan Silverman, 2001. "The Effect of Adolescent Experience on Labor Market Outcomes: The Case of Height, Third Version," PIER Working Paper Archive 04-013, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania, revised 05 Jan 2004.
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