Family Background, Self-Confidence and Economic Outcomes

39 Pages Posted: 2 Oct 2012

See all articles by Antonio Filippin

Antonio Filippin

Università degli Studi di Milano; IZA Institute of Labor Economics

Marco Paccagnella

Bank of Italy

Multiple version iconThere are 2 versions of this paper

Date Written: July 26, 2012

Abstract

In this paper we analyze the role played by self-confidence, modeled as beliefs about one’s ability, in shaping task choices. We propose a model in which fully rational agents exploit all the available information to update their beliefs using Bayes’ rule, eventually learning their true type. We show that when the learning process does not converge quickly to the true ability level, small differences in initial confidence can result in diverging patterns of human capital accumulation between otherwise identical individuals. If differences in self-confidence are correlated with socio-economic background (as a large body of empirical literature suggests), self-confidence can be a channel through which education and earning inequalities perpetuate across generations. Our theory suggests that cognitive tests should take place as early as possible, in order to avoid that systematic differences in self-confidence among equally talented people lead to the emergence of gaps in the accumulation of human capital.

Keywords: human capital, self-confidence, socio-economic status

JEL Classification: I24, D83, J24, J62

Suggested Citation

Filippin, Antonio and Paccagnella, Marco, Family Background, Self-Confidence and Economic Outcomes (July 26, 2012). Bank of Italy Temi di Discussione (Working Paper) No. 875, Available at SSRN: https://ssrn.com/abstract=2154969 or http://dx.doi.org/10.2139/ssrn.2154969

Antonio Filippin

Università degli Studi di Milano ( email )

Milan, 20122
Italy

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Marco Paccagnella (Contact Author)

Bank of Italy ( email )

Via Nazionale 91
Rome, 00184
Italy

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