Confidence and Career Choices: An Experiment
Wissenschaftszentrum Berlin für Sozialforschung Discussion Paper SP II 2018–301
59 Pages Posted: 15 Jan 2018
Date Written: January 10, 2018
Confidence is often seen as the key to success. Empirical evidence about whether such beliefs causally map into actions is, however, sparse. In this paper, we experimentally investigate the causal effect of an increase in confidence about one’s own ability on two central choices made by workers in the labor market: choosing between jobs with different incentive schemes, and the subsequent choice of how much effort to exert within the job. Using a hard-easy task manipulation to shift beliefs, we find that beliefs can be shifted, which in turn shifts decisions. In our setting, the beliefs of low ability individuals are more malleable than those of high ability individuals. Therefore, the treatment induces an increase in confidence and detrimental decision making by low ability workers but does not affect the outcomes of high ability workers. Men and women react similarly to the treatment. However, men hold higher baseline beliefs, implying that women make better incentive choice decisions. Policy implications regarding pre-labor market confidence development by means of feedback and grade inflation are discussed.
Keywords: Overconfidence, Experiment, Beliefs, Real-Effort, Grade Inflation
JEL Classification: C91, D03, M50, J24
Suggested Citation: Suggested Citation