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Confidence and career choices: An experiment

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  • Barron, Kai
  • Gravert, Christina

Abstract

Confidence in one's own abilities is often seen as an important determinant of being successful. Empirical evidence about how such beliefs about one's own abilities causally influence choices is, however, sparse. In this paper, we use a stylized laboratory experiment to investigate the causal effect of an increase in confidence on two important choices made by workers in the labor market: (i) choosing between jobs with a payment scheme that depends heavily on ability [high earnings risk] and those that pay a fixed wage [low earnings risk], and (ii) the subsequent choice of how much effort to exert within the job. We find that an exogenous increase in confidence leads to an increase in subjects' propensity to choose payment schemes that depend heavily on ability. This is detrimental for low ability workers due to high baseline levels of confidence.

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  • Barron, Kai & Gravert, Christina, 2020. "Confidence and career choices: An experiment," Discussion Papers, Research Unit: Economics of Change SP II 2018-301r2, WZB Berlin Social Science Center.
  • Handle: RePEc:zbw:wzbeoc:spii2018301r2
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    Cited by:

    1. Christopher Roth & Sonja Settele & Johannes Wohlfart, 2020. "Risk Exposure and Acquisition of Macroeconomic Information," CESifo Working Paper Series 8634, CESifo.
    2. Murad, Zahra & Starmer, Chris, 2021. "Confidence snowballing and relative performance feedback," Journal of Economic Behavior & Organization, Elsevier, vol. 190(C), pages 550-572.
    3. Friehe, Tim & Pannenberg, Markus, 2021. "Time preferences and overconfident beliefs: Evidence from germany," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 92(C).
    4. Manar Alnamlah & Christina Gravert, 2020. "She Could Not Agree More: The Role of Failure Attribution in Shaping the Gender Gap in Competition Persistence," CEBI working paper series 20-25, University of Copenhagen. Department of Economics. The Center for Economic Behavior and Inequality (CEBI).

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    Keywords

    overconfidence; experiment; beliefs; real-effort; career choices;
    All these keywords.

    JEL classification:

    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • M50 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - General
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity

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