Overconfidence in Labor Markets

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ID Serval
serval:BIB_8171F122B2A6
Type
Partie de livre
Collection
Publications
Institution
Titre
Overconfidence in Labor Markets
Titre du livre
Handbook of Labor, Human Resources and Population and Economics
Auteur⸱e⸱s
Santos Pinto Luis, De la Rosa Leonidas Enrique
Editeur
Springer
Statut éditorial
Publié
Date de publication
07/09/2020
Langue
anglais
Résumé
This chapter reviews how worker overconfidence affects labor markets. Evidence from psychology and economics shows that in many situations, most people tend to overestimate their absolute skills, overplace themselves relative to others, and overestimate the precision of their knowledge. The chapter starts by reviewing evidence for overconfidence and for how
overconfidence affects economic choices. Next, it reviews economic explanations for overconfidence. After that, it discusses research on the impact of worker overconfidence on labor markets where wages are determined by bargaining between workers and firms. Here, three key questions are addressed. First, how does worker overconfidence affect effort provision
for a fixed compensation scheme? Second, how should firms design compensation schemes when workers are overconfident? In particular, will a compensation scheme offered to an overconfident worker have higher-or lower-powered incentives than that offered to a worker with accurate self-perception? Third, can worker overconfidence lead to a Pareto improvement? The chapter continues by reviewing research on the impact of worker overconfidence on labor markets where workers can move between firms and where neither firms nor workers have discretion over wage setting. The chapter concludes with a summary of its main findings and a discussion of avenues for future research.
Création de la notice
25/02/2022 10:41
Dernière modification de la notice
26/02/2022 7:10
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