Self-Belief, Reference-Dependent Expectations and Labour Market Outcomes

A recent IZA paper, "Subjective Beliefs and Schooling Decisions", by Belzil (May 2007), examines sequential schooling decisions made by agents who are endowed with subjective beliefs about their own ability. I find Belzil's approach very interesting; it seems that there is a literature developing on this issue - people my remember that I mentioned Oxoby (2007), on the blog before. In his paper, “Skill Uncertainty and Social Inference” (IZA WP-2567), he suggests that individuals without familiar reference points for academic achievement may under-invest in their human capital due to uncertain expectations about their academic ability. And I suggested that evidence for this topic could possibly pave the way for behavioural interventions to raise expectations about academic ability. There is a further potential link between the literature on this topic and the work that Heckman is doing on personality metrics, such as his enquiries into how self-esteem affects labour market outcomes.