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Overconfidence over the lifespan: Evidence from Germany

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  • Friehe, Tim
  • Pannenberg, Markus

Abstract

This paper investigates if and how overconfidence at the individual level changes over the course of a life. We provide age profiles of a novel continuous overconfidence measure and the probability of being overconfident, conditioning on personality traits (including the Big 5 and optimism), economic preferences, cognitive ability, and the individual’s socio-economic status. Our empirical work relies on representative panel data sets from Germany, and individuals’ both self-assessed and actual percentile in the monthly gross wage distribution are incorporated in our measure of overconfidence. We find that both the level of relative placement and the overplacement probability increase with age up to one's fifties.

Suggested Citation

  • Friehe, Tim & Pannenberg, Markus, 2019. "Overconfidence over the lifespan: Evidence from Germany," Journal of Economic Psychology, Elsevier, vol. 74(C).
    • Handle: RePEc:eee:joepsy:v:74:y:2019:i:c:s0167487019300479
    DOI: 10.1016/j.joep.2019.102207
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    Cited by:

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    6. Friehe, Tim & Pannenberg, Markus, 2021. "Time preferences and overconfident beliefs: Evidence from germany," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 92(C).
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    More about this item

    Keywords

    Confidence; Age; Wage distribution; Germany; SOEP;
    All these keywords.

    JEL classification:

    • D01 - Microeconomics - - General - - - Microeconomic Behavior: Underlying Principles
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • J14 - Labor and Demographic Economics - - Demographic Economics - - - Economics of the Elderly; Economics of the Handicapped; Non-Labor Market Discrimination

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