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Can Money Change Who We Are? Estimating the Effects of Unearned Income on Measures of Incentive-Enhancing Personality Traits

Author Info

Listed author(s):
  • Powdthavee, Nattavudh

    ()

    (University of Warwick)

  • Boyce, Christopher J.

    ()

    (University of Manchester)

  • Wood, Alex M.

    ()

    (University of Manchester)

Abstract

The importance of noncognitive childhood skills in predicting higher wages is well documented in economics. This paper studies the reverse. Using surveys of lottery winners, we analyze the effects of unearned income on the Big Five personality traits. After correcting for potential endogeneity problems from prize sizes, we find that unearned income improves traits that predict pro-social and cooperative behaviors, preferences for social contact, empathy, and gregariousness, and reduces individuals' tendency toward negative emotional states: known in economics literature as incentive-enhancing personality traits. Our results support the possibility of scope for later interventions to improve the personality traits of adults.

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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 6131.

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Length: 38 pages
Date of creation: Nov 2011
Handle: RePEc:iza:izadps:dp6131
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Keywords: noncognitive skills; personality traits; lottery winners; instrumental variables; unearned income;

Find related papers by JEL classification:

  • D3 - Microeconomics - - Distribution
  • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity

This paper has been announced in the following NEP Reports:

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  9. Nattavudh Powdthavee, 2010. "How much does money really matter? Estimating the causal effects of income on happiness," Empirical Economics, Springer, vol. 39(1), pages 77-92, August.
  10. Herbert Gintis & Samuel Bowles & Melissa Osborne, 2001. "Incentive-Enhancing Preferences: Personality, Behavior, and Earnings," American Economic Review, American Economic Association, vol. 91(2), pages 155-158, May.
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  20. Semykina, Anastasia & Linz, Susan J., 2007. "Gender differences in personality and earnings: Evidence from Russia," Journal of Economic Psychology, Elsevier, vol. 28(3), pages 387-410, June.
  21. Mikael Lindahl, 2005. "Estimating the Effect of Income on Health and Mortality Using Lottery Prizes as an Exogenous Source of Variation in Income," Journal of Human Resources, University of Wisconsin Press, vol. 40(1).
  22. 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.
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  25. Jule Specht & Boris Egloff & Stefan C. Schmukle, 2011. "Stability and Change of Personality across the Life Course: The Impact of Age and Major Life Events on Mean-Level and Rank-Order Stability of the Big Five," SOEPpapers on Multidisciplinary Panel Data Research 377, DIW Berlin, The German Socio-Economic Panel (SOEP).
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Cited by:

  1. Mosca, Irene & McCrory, Cathal, 2016. "Personality and wealth accumulation among older couples: Do dispositional characteristics pay dividends?," Journal of Economic Psychology, Elsevier, vol. 56(C), pages 1-19.

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