Personality Traits and Labour Economics
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1 Personality Traits and Labour Economics Veronica De Nisi University La Sapienza, Rome Doctoral Students Seminar 11 February 2015 De Nisi (UniRoma1) Personality Traits and Labour Economics Doctoral Students Seminar 1 / 13
2 Outline Aims of the research Introduction - Personality traits into economics Overview of the current literature Concluding remarks De Nisi (UniRoma1) Personality Traits and Labour Economics Doctoral Students Seminar 2 / 13
3 Outline Aims of the research Introduction - Personality traits into economics Overview of the current literature Concluding remarks De Nisi (UniRoma1) Personality Traits and Labour Economics Doctoral Students Seminar 2 / 13
4 Outline Aims of the research Introduction - Personality traits into economics Overview of the current literature Concluding remarks De Nisi (UniRoma1) Personality Traits and Labour Economics Doctoral Students Seminar 2 / 13
5 Outline Aims of the research Introduction - Personality traits into economics Overview of the current literature Concluding remarks De Nisi (UniRoma1) Personality Traits and Labour Economics Doctoral Students Seminar 2 / 13
6 Research Objectives The aims of my research are: 1 to highlight how personality traits may enrich economics; 2 to explain why personality traits may explain wage differentials. In particular, to show their influence on incentive system, focusing on the links between the non standard preference of reciprocity and personality traits; 3 to test empirically these predictions. De Nisi (UniRoma1) Personality Traits and Labour Economics Doctoral Students Seminar 3 / 13
7 Research Objectives The aims of my research are: 1 to highlight how personality traits may enrich economics; 2 to explain why personality traits may explain wage differentials. In particular, to show their influence on incentive system, focusing on the links between the non standard preference of reciprocity and personality traits; 3 to test empirically these predictions. De Nisi (UniRoma1) Personality Traits and Labour Economics Doctoral Students Seminar 3 / 13
8 Research Objectives The aims of my research are: 1 to highlight how personality traits may enrich economics; 2 to explain why personality traits may explain wage differentials. In particular, to show their influence on incentive system, focusing on the links between the non standard preference of reciprocity and personality traits; 3 to test empirically these predictions. De Nisi (UniRoma1) Personality Traits and Labour Economics Doctoral Students Seminar 3 / 13
9 Psychological Measurement System Definitions Definition in Personality Psychology Personality traits are the relatively enduring patterns of thoughts, feelings, and behaviors that reflect the tendency to respond in certain ways under certain circumstances (Roberts, 2009) Personality traits are one of the determinants of personality. They produce the observed behaviours that are used to infer generating traits, that is measured personality. De Nisi (UniRoma1) Personality Traits and Labour Economics Doctoral Students Seminar 4 / 13
10 The Big Five Taxonomy Finally, in 1970s psychologists organized personality traits into 5 superordinate dimensions. The Big Five are: Openness to Experience: to be open to new cultural or intellectual experiences Coscientiousness: to be organized, responsible and hardworking Extraversion: an orientation toward the outer world of people and things Agreebleness: to act in a cooperative, unselfish manner Neuroticism: a chronic level of emotional instability They summarize a large number of distinct personality facets. Ex: Trust or Altruism are facets of Agreebleness. De Nisi (UniRoma1) Personality Traits and Labour Economics Doctoral Students Seminar 5 / 13
11 The Big Five Taxonomy Finally, in 1970s psychologists organized personality traits into 5 superordinate dimensions. The Big Five are: Openness to Experience: to be open to new cultural or intellectual experiences Coscientiousness: to be organized, responsible and hardworking Extraversion: an orientation toward the outer world of people and things Agreebleness: to act in a cooperative, unselfish manner Neuroticism: a chronic level of emotional instability They summarize a large number of distinct personality facets. Ex: Trust or Altruism are facets of Agreebleness. De Nisi (UniRoma1) Personality Traits and Labour Economics Doctoral Students Seminar 5 / 13
12 The Big Five Taxonomy Finally, in 1970s psychologists organized personality traits into 5 superordinate dimensions. The Big Five are: Openness to Experience: to be open to new cultural or intellectual experiences Coscientiousness: to be organized, responsible and hardworking Extraversion: an orientation toward the outer world of people and things Agreebleness: to act in a cooperative, unselfish manner Neuroticism: a chronic level of emotional instability They summarize a large number of distinct personality facets. Ex: Trust or Altruism are facets of Agreebleness. De Nisi (UniRoma1) Personality Traits and Labour Economics Doctoral Students Seminar 5 / 13
13 The Big Five Taxonomy Finally, in 1970s psychologists organized personality traits into 5 superordinate dimensions. The Big Five are: Openness to Experience: to be open to new cultural or intellectual experiences Coscientiousness: to be organized, responsible and hardworking Extraversion: an orientation toward the outer world of people and things Agreebleness: to act in a cooperative, unselfish manner Neuroticism: a chronic level of emotional instability They summarize a large number of distinct personality facets. Ex: Trust or Altruism are facets of Agreebleness. De Nisi (UniRoma1) Personality Traits and Labour Economics Doctoral Students Seminar 5 / 13
14 The Big Five Taxonomy Finally, in 1970s psychologists organized personality traits into 5 superordinate dimensions. The Big Five are: Openness to Experience: to be open to new cultural or intellectual experiences Coscientiousness: to be organized, responsible and hardworking Extraversion: an orientation toward the outer world of people and things Agreebleness: to act in a cooperative, unselfish manner Neuroticism: a chronic level of emotional instability They summarize a large number of distinct personality facets. Ex: Trust or Altruism are facets of Agreebleness. De Nisi (UniRoma1) Personality Traits and Labour Economics Doctoral Students Seminar 5 / 13
15 Big Five Personality Factor American Psychology Association Dictionary description Facets (and correlated trait adjective) Related Traits Conscientiousness The tendency to be organized, responsible and hardworking Competence (efficient), Order (organized), Dutifulness (not careless), Achievement striving (ambitious), Selfdiscipline (not lazy), and Deliberation (not impulsive) Grit, Perseverance, Delay of gratification, Impulse control, Achievement striving, Ambition and Work ethic Openness to Experience The tendency to be open to new aesthetic, cultural or intellectual experiences Fantasy (imaginative), Aesthetic (artistic), Feelings (excitable), Actions (wide interests), Ideas (curious), and Values (unconventional) - Extraversion An orientation of one s interests and energies toward the outer world of people and things rather than the inner world of subjective experience; characterized by positive affect and sociability Warmth (friendly), Gregariousness (sociable), Assertiveness (self-confident), Activity (energetic), Excitement seeking (adventurous), and Positive emotions (enthusiastic) - Agreeableness The tendency to act in a cooperative, unselfish manner Trust (forgiving), Straight-forwardness (not demanding), Altruism (warm), Compliance (not stubborn), Modesty (not show-off), and Tendermindness (sympathetic) Empathy, Perspective taking, Cooperation, and Competitiveness Neuroticism Neuroticism is a chronic level of emotional instability and proneness to psychological distress Anxiety (worrying), Hostility (irritable), Depression (not contented), Impulsiveness (moody), Vulnerability to stress (not self-confident) Internal vs. External, Locus of control, Core selfevaluation, Self-esteem, Self-efficacy,Optimism, and Axis I psychopathologies (mental disorders) De Nisi (UniRoma1) Personality Traits and Labour Economics Doctoral Students Seminar 6 / 13
16 Personality Traits into data The Big Five Factors as a framework for integrating the existing evidence and for structuring future research. Information on the Big Five is collected in: German Socio Economic Panel, (2005); British Household Panel Survey, (2005); The DNB Household Survey, (1996). De Nisi (UniRoma1) Personality Traits and Labour Economics Doctoral Students Seminar 7 / 13
17 Personality Traits into data The Big Five Factors as a framework for integrating the existing evidence and for structuring future research. Information on the Big Five is collected in: German Socio Economic Panel, (2005); British Household Panel Survey, (2005); The DNB Household Survey, (1996). De Nisi (UniRoma1) Personality Traits and Labour Economics Doctoral Students Seminar 7 / 13
18 Personality Traits into data The Big Five Factors as a framework for integrating the existing evidence and for structuring future research. Information on the Big Five is collected in: German Socio Economic Panel, (2005); British Household Panel Survey, (2005); The DNB Household Survey, (1996). De Nisi (UniRoma1) Personality Traits and Labour Economics Doctoral Students Seminar 7 / 13
19 Personality Traits into Economic Literature Through which channels and why do personality traits enter into literature? 1 Behavioural Economics against homo economicus: a new deeper view of human motivation. New behavioural models allowing for non standard preferences (e.g., reciprocity), beliefs and decision making; 2 Growing empirical evidence showing that personality traits are likely to affect why, when, where, and how much individuals work. De Nisi (UniRoma1) Personality Traits and Labour Economics Doctoral Students Seminar 8 / 13
20 Personality Traits into Economic Literature Through which channels and why do personality traits enter into literature? 1 Behavioural Economics against homo economicus: a new deeper view of human motivation. New behavioural models allowing for non standard preferences (e.g., reciprocity), beliefs and decision making; 2 Growing empirical evidence showing that personality traits are likely to affect why, when, where, and how much individuals work. De Nisi (UniRoma1) Personality Traits and Labour Economics Doctoral Students Seminar 8 / 13
21 Personality Traits into Models Personality Traits and Preference Parameters Since they are the person-specific determinants of behaviour, their natural counterpart are preferences. Note that: empirical evidence is weak (with the exception of the links between reciprocity and Big Five); are personality traits constraits or preferences? For instance: extraversion is essential traits for a salesman (Borghans et al, 2008) or it might reflect a preference for social interactions (Almlund et al, 2011) De Nisi (UniRoma1) Personality Traits and Labour Economics Doctoral Students Seminar 9 / 13
22 Personality Traits into Models Personality Traits and Preference Parameters Since they are the person-specific determinants of behaviour, their natural counterpart are preferences. Note that: empirical evidence is weak (with the exception of the links between reciprocity and Big Five); are personality traits constraits or preferences? For instance: extraversion is essential traits for a salesman (Borghans et al, 2008) or it might reflect a preference for social interactions (Almlund et al, 2011) De Nisi (UniRoma1) Personality Traits and Labour Economics Doctoral Students Seminar 9 / 13
23 Reciprocity and Personality Traits Linking two literatures The links between personality traits and social preferences are quite well established. Agreebleness (and Openness to Experience and Emotional Stability) are closely related to reciprocity. Definition of reciprocity Reciprocal individuals also care about the material resources to relevant reference agents. They respond to actions that are perceived to be kind in a kind manner and to actions that are perceived to be hostile in a hostile manner, even if it is costly for them and yields neither present nor future material rewards. De Nisi (UniRoma1) Personality Traits and Labour Economics Doctoral Students Seminar 10 / 13
24 Reciprocity and Wage-Effort Relationship Akerlof (1982) shows that reciprocity affects wages and effort provision (gift-exchange hypothesis). It may help solving the principal-agent problem in case of contractual incompleteness; Reciprocity may govern the laws of cooperation and collective actions. Reciprocators are conditionally cooperative and they may punish free-riders if they exploit the cooperators; It may also influence the incentives for selfish types. De Nisi (UniRoma1) Personality Traits and Labour Economics Doctoral Students Seminar 11 / 13
25 Reciprocity and Wage-Effort Relationship Akerlof (1982) shows that reciprocity affects wages and effort provision (gift-exchange hypothesis). It may help solving the principal-agent problem in case of contractual incompleteness; Reciprocity may govern the laws of cooperation and collective actions. Reciprocators are conditionally cooperative and they may punish free-riders if they exploit the cooperators; It may also influence the incentives for selfish types. De Nisi (UniRoma1) Personality Traits and Labour Economics Doctoral Students Seminar 11 / 13
26 Reciprocity and Wage-Effort Relationship Akerlof (1982) shows that reciprocity affects wages and effort provision (gift-exchange hypothesis). It may help solving the principal-agent problem in case of contractual incompleteness; Reciprocity may govern the laws of cooperation and collective actions. Reciprocators are conditionally cooperative and they may punish free-riders if they exploit the cooperators; It may also influence the incentives for selfish types. De Nisi (UniRoma1) Personality Traits and Labour Economics Doctoral Students Seminar 11 / 13
27 Reciprocity, Personality Traits and Incentive System An emerging literature investigates: How do monetary incentives and reciprocal motivations interact? What is the impact on co-worker and manager-employee relationships? Do they affect the firm organizational structure and lead to different job characteristics? Firms use personality test to screen reciprocal workers who are very valuable for firms. Hence, the incentive system may be one of the channels of influence of personality traits on labour market outcomes. De Nisi (UniRoma1) Personality Traits and Labour Economics Doctoral Students Seminar 12 / 13
28 Reciprocity, Personality Traits and Incentive System An emerging literature investigates: How do monetary incentives and reciprocal motivations interact? What is the impact on co-worker and manager-employee relationships? Do they affect the firm organizational structure and lead to different job characteristics? Firms use personality test to screen reciprocal workers who are very valuable for firms. Hence, the incentive system may be one of the channels of influence of personality traits on labour market outcomes. De Nisi (UniRoma1) Personality Traits and Labour Economics Doctoral Students Seminar 12 / 13
29 Reciprocity, Personality Traits and Incentive System An emerging literature investigates: How do monetary incentives and reciprocal motivations interact? What is the impact on co-worker and manager-employee relationships? Do they affect the firm organizational structure and lead to different job characteristics? Firms use personality test to screen reciprocal workers who are very valuable for firms. Hence, the incentive system may be one of the channels of influence of personality traits on labour market outcomes. De Nisi (UniRoma1) Personality Traits and Labour Economics Doctoral Students Seminar 12 / 13
30 Concluding Remarks To sum up, my next steps will be: studying with Prof. Englmaier (LMU) in Munich, how reciprocal motivations could affect the optimal design of contracts; testing empirically these predictions, (using Workplace Employment Relations Survey (WERS), a large scale survey of Britain-based firms); concluding survey. De Nisi (UniRoma1) Personality Traits and Labour Economics Doctoral Students Seminar 13 / 13
31 Concluding Remarks To sum up, my next steps will be: studying with Prof. Englmaier (LMU) in Munich, how reciprocal motivations could affect the optimal design of contracts; testing empirically these predictions, (using Workplace Employment Relations Survey (WERS), a large scale survey of Britain-based firms); concluding survey. De Nisi (UniRoma1) Personality Traits and Labour Economics Doctoral Students Seminar 13 / 13
32 Concluding Remarks To sum up, my next steps will be: studying with Prof. Englmaier (LMU) in Munich, how reciprocal motivations could affect the optimal design of contracts; testing empirically these predictions, (using Workplace Employment Relations Survey (WERS), a large scale survey of Britain-based firms); concluding survey. De Nisi (UniRoma1) Personality Traits and Labour Economics Doctoral Students Seminar 13 / 13
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