The Impact of Psychological and Human Capital on Wages

Abstract

Historically, economists have taken the position that psychological capital is either unobservable or unmeasurable; thus, heretofore, little evidence has been available on the contribution of psychological capital to wages. Using data drawn from two dgferent waves of the National Longitudinal Survey of Youth, we offer evidence that psychological capital has both a direct effect-via self-esteemAnd an indirect effect-through locus of control-on an individual k real wage. We find a person 5 wage is more sensitive to changes in self-esteem than to comparable alterations in human capital. Both relative wages and human capital contribute to self-esteem. (JEL E24, 56)

Individual and Societal Effects of Mental Disorders on Earnings in the United States: Results From the National Comorbidity Survey Replication

“…Socio-demographic control variables-Control variables were included for five sociodemographic variables known to predict earnings (13,14): age at interview, sex, race-ethnicity (Non-Hispanic White, Non-Hispanic Black, Hispanic, Other), Census region (Northeast, Midwest, South, West), and urbanicity (Major Metropolitan Area, other urbanized areas, rural areas). Rice et al and Harwood et al also controlled respondent education, marital status, and number of household members.…”

Cognitive dissonance, pessimism, and behavioral spillover effects

“…Pessimism of this sort may manifest itself in lower starting wages or lower and more infrequent wage increases and promotions, both of which may lead to an inferior wage path for pessimistic labor market participants. The inferior wage path would lead to lower relative wages and greater pessimism or lower self-esteem (see Goldsmith, et al, 1997), thereby reinforcing the cycle. As such, combating pessimism can be seen as an important aspect in reducing poverty and reducing social and economic exclusion.…”

“…For example, if dispositional pessimism at one point in time can significantly predict one's tendency to be passive or withdraw effort (Scheier and Carver, 1985), and if such a disposition is persistent and stable, then an event that affects one's disposition will have spillover effects with potentially important economic consequences (e.g., job search, bargaining behavior, investment choice, etc.). For example, Goldsmith et al (1997) shows that one's "psychological capital" significantly affects labor market earnings. Specifically, an investment in one's psychological capital is estimated to increase wages by even more than a comparable investment in human capital.…”

Can Risk-taking Preferences be Modified? Some Experimental Evidence

“…Clearly the use of contemporaneous survey--based measures of risk--aversion, self--esteem and competitive or collaborative behavioural traits is dogged by potential endogeneity. However, personality variables are incorporated into the survey--based analysis of, inter alia, Goldsmith et al (1997), Bowles et al (2001), and Mueller and Plug (2004). Using NLSY data, Goldsmith et al (1997) show that personality variables as well as human capital are correlated with wages, but they do not investigate the gender dimension.…”

“…However, personality variables are incorporated into the survey--based analysis of, inter alia, Goldsmith et al (1997), Bowles et al (2001), and Mueller and Plug (2004). Using NLSY data, Goldsmith et al (1997) show that personality variables as well as human capital are correlated with wages, but they do not investigate the gender dimension. However, Mueller and Plug (2006) do examine the gender dimension using a Wisconsin--based survey.…”