Biased by Success and Failure: How Unemployment Shapes Stated Locus of Control

42 Pages Posted: 12 Jan 2018

See all articles by Malte Preuss

Malte Preuss

Free University of Berlin (FUB)

Juliane Hennecke

Otto von Guericke University Magdeburg; Auckland University of Technology

Date Written: December 2017

Abstract

Due to its extraordinary explanatory power for individual behavior, the interest in the concept of locus of control (LOC) has increased substantially within applied economic research. But, even though LOC has been found to affect economic behavior in many ways, the reliability of these findings is at risk as they commonly rely on the assumption that LOC is stable over the life course. While absolute stability has been generally rejected, the extent to which LOC and thus personality changes is, nonetheless, strongly debated. We contribute to this discussion by analyzing the effect of unemployment on LOC. Based on German panel data, we apply a difference-in-difference approach by using an involuntary job loss as trigger for unemployment. Overall, we find a significant shift in stated LOC due to unemployment. Because the effect is observable during unemployment only and not heterogeneous with respect to individual characteristics or unemployment duration, we conclude that only the stated LOC is biased during unemployment but the underlying personality trait itself is not affected.

Keywords: personality, locus of control, unemployment, measurement error

JEL Classification: C83, J24, J64, J65

Suggested Citation

Preuss, Malte and Hennecke, Juliane, Biased by Success and Failure: How Unemployment Shapes Stated Locus of Control (December 2017). SOEPpaper No. 943, Available at SSRN: https://ssrn.com/abstract=3098841 or http://dx.doi.org/10.2139/ssrn.3098841

Malte Preuss (Contact Author)

Free University of Berlin (FUB) ( email )

Van't-Hoff-Str. 8
Berlin, Berlin 14195
Germany

Juliane Hennecke

Otto von Guericke University Magdeburg ( email )

Magdeburg
Germany

Auckland University of Technology ( email )

AUT City Campus
Private Bag 92006
Auckland, 1142
New Zealand

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