Preferences, Personality and Long-Term Labor Market Outcomes

P 36845-G Kurzfassung Englisch Economic inequality has recently received substantial attention by academics and the general public alike. The phenomenon of economic inequality has many different aspects, in particular, the unequal distribution of market income between top earners and the rest, the gender pay gap, and the heterogeneous income distribution among individuals with similar observable characteristics. For policy makers it is critical to know which mechanisms create economic inequality in order to design effective education, tax and social security systems. In this project, we study to what extent income inequality can be traced back to luck, cognitive ability, preferences or personality traits. To this end, we build up a panel dataset on the personality traits, preferences, early career choices, and long-term labor market outcomes of young professionals. The unique feature of this dataset is its long-term nature. In January 2016, we conducted laboratory experiments with 565 business and economics students from Cologne, Düsseldorf and Frankfurt. In these experiments, we measured a variety of preferences and personality traits. Since then, we followed our subjects and contacted them every two years to obtain data on their job market outcomes: graduation, employments, salaries, job switches, and staff responsibilities. The next waves of data collections will take place in 2024 and 2026, so that the final dataset will cover more than 10 years of early career choices and job market outcomes. It will contain many important details that administrative datasets typically do not capture, e.g., job contents, working hours, staff responsibilities, and the structure of compensation packages. Of particular interest for our analysis of long-run job market outcomes will be the following personality traits. First, an individual`s willingness to compete, that is, his or her inclination to self- select into competitive situations like promotion tournaments or competitive application procedures. Second, an individuals perseverance or grit may matter for job market outcomes. Perseverance is a non-cognitive skill that has been shown to be positively correlated to professional success. Finally, we consider preferences for non-wage amenities like job flexibility and work meaning as determinants for job market outcomes. We expect that the project generates substantial progress for scientific research, public policy, as well as practitioners in higher education. It will generate substantial knowledge about which and how preferences and personality traits create wage inequality and the gender wage gap. In particular, this is relevant for future research that intends to alter personality traits (such as willingness to compete) through interventions. In the context of higher education, the results could be relevant for the selection of students, study program design, and the development of skills.