Confidence and Career Choices: An Experiment

Wissenschaftszentrum Berlin für Sozialforschung Discussion Paper SP II 2018–301

57 Pages Posted: 15 Jan 2018 Last revised: 28 Jan 2021

See all articles by Kai Barron

Kai Barron

WZB Berlin Social Science Center

Christina Annette Gravert

University of Copenhagen

Multiple version iconThere are 2 versions of this paper

Date Written: January 7, 2021

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.

Keywords: Overconfidence, Experiment, Beliefs, Real-Effort, Grade Inflation

JEL Classification: C91, D03, M50, J24

Suggested Citation

Barron, Kai and Gravert, Christina Annette, Confidence and Career Choices: An Experiment (January 7, 2021). Wissenschaftszentrum Berlin für Sozialforschung Discussion Paper SP II 2018–301, Available at SSRN: https://ssrn.com/abstract=3099491 or http://dx.doi.org/10.2139/ssrn.3099491

Kai Barron

WZB Berlin Social Science Center ( email )

Reichpietschufer 50
D-10785 Berlin, 10785
Germany

HOME PAGE: http://sites.google.com/site/kaibarron/

Christina Annette Gravert (Contact Author)

University of Copenhagen ( email )

Nørregade 10
Copenhagen, DK-1165
Denmark

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