The economics of self-confidence

Printed from: https://newbostonpost.com/2016/04/07/the-economics-of-self-confidence/

Which types of people typically move to major cities, such as New York, Washington, D.C., or Boston? A recent study suggests that a person’s personality might have more influence on the decision to move to the city than either wealth, education or age.  

In fact, self-confidence might play a strong role in who migrates into major metropolitan areas, according to a study, authored by economists Jorge De la Roca of the University of Southern California, Gianmarco Ottaviano of the London School of Economics, and Diego Puga of the Center for Monetary and Financial Studies in Madrid.  

In the “City of Dreams,” the authors describe their finding that fully 56 percent of U.S. residents find themselves in the same city or town at the age of 40 as at the age 14, including 40 percent of college-educated workers. To find out why, the authors compared a worker’s skill set, education and psychological factors such as self-confidence, defined in the study as “individuals’ assessment of their own ability.”

The authors note that there is often very little correlation between people’s assessment of their own ability and their actual ability. But it’s easier to be mobile earlier on in one’s career.

“When young individuals choose a location, they have a very imperfect assessment of their own ability,” the authors write, observing that “by the time they learn enough about it, early decisions have had a lasting impact and reduce their incentives to move.”

The authors found that having a college education increases the likelihood that a younger worker will move to a large city by 120 percent; being single or unmarried increases the chances by 44 percent.  But self-confidence tops the list of factors that influence a leap to a bigger metro area.

Self-confidence especially helps younger, early-career workers – “junior workers” – who will make the leap to a large city regardless of higher living costs, and who may find better opportunity, stronger work experience and higher pay.

“Junior workers choose their location based on the benefits and costs of big cities and on their self-confidence, which may or may not correspond to their actual ability,” the study notes. “They then accumulate experience depending on their chosen location, ability and luck. In the process they also learn their own ability.”

However, as Atlantic Magazine’s urban zine CityLab points out, self-confidence also helps an employee move up in their career in other forms, such as networking, job transition and career mobility.

The “City of Dreams” study claims that self-confidence is often ultimately self-fulfilling as confident steps forward lead to better opportunities and achieving one’s dreams – it can’t hurt to try, right? – although it notes that “those dreams do not come true for everyone.”

Contact Kara Bettis at [email protected] or on Twitter @karabettis.

NBPEconomic

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