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The Returns to Personality Traits across the Wage Distribution

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  • Matthias Collischon

Abstract

This paper investigates heterogeneous wage effects of non-cognitive skills across the wage distribution. I develop a model of wage determination under uncertainty with respect to individual productivity based on three components (minimum wages, productivity premiums, bargaining premiums). Based on this model, I expect (i) a larger importance and (ii) larger effects of non-cognitive skills for high-wage employees compared to their low-wage counterparts. I test these hypotheses with unconditional quantile regressions using large-scale survey data from Germany, the UK, and Australia. To test the joint explanatory contribution of multiple variables within a quantile-regression framework, I propose a new statistic that quantifies the rise in explanatory power generated by additional explanatory variables. The findings indicate a rising importance as well as increasing effects of certain personality traits (agreeableness, neuroticism and risk taking) across the wage distribution for full-time employed males and females.

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  • Matthias Collischon, 2017. "The Returns to Personality Traits across the Wage Distribution," SOEPpapers on Multidisciplinary Panel Data Research 921, DIW Berlin, The German Socio-Economic Panel (SOEP).
    • Handle: RePEc:diw:diwsop:diw_sp921
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    Cited by:

    1. Bühler, Dorothee & Sharma, Rasadhika & Stein, Wiebke, 2020. "Occupational Attainment and Earnings in Southeast Asia: The Role of Non-cognitive Skills," Labour Economics, Elsevier, vol. 67(C).
    2. Peter A. Savelyev & Kegon T. K. Tan, 2019. "Socioemotional Skills, Education, and Health-Related Outcomes of High-Ability Individuals," American Journal of Health Economics, MIT Press, vol. 5(2), pages 250-280, Spring.
    3. Alderotti, Giammarco & Rapallini, Chiara & Traverso, Silvio, 2023. "The Big Five personality traits and earnings: A meta-analysis," Journal of Economic Psychology, Elsevier, vol. 94(C).
    4. Bonaccolto-Töpfer, Marina & Briel, Stephanie, 2022. "The gender pay gap revisited: Does machine learning offer new insights?," Labour Economics, Elsevier, vol. 78(C).
    5. Sofie Cabus & Joanna Napierala & Stephanie Carretero, 2021. "The Returns to Non-Cognitive Skills: A Meta-Analysis," JRC Working Papers on Labour, Education and Technology 2021-06, Joint Research Centre.
    6. Deborah A. Cobb‐Clark & Lihini De Silva, 2021. "Participation, Unemployment, and Wages," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 54(4), pages 482-493, December.
    7. Collischon Matthias, 2019. "Is There a Glass Ceiling over Germany?," German Economic Review, De Gruyter, vol. 20(4), pages 329-359, December.
    8. Kamila Cygan-Rehm, 2022. "Lifetime Consequences of Lost Instructional Time in the Classroom: Evidence from Shortened School Years," CESifo Working Paper Series 9892, CESifo.
    9. Melchior Vella, 2024. "The relationship between the Big Five personality traits and earnings: Evidence from a meta‐analysis," Bulletin of Economic Research, Wiley Blackwell, vol. 76(3), pages 685-712, July.
    10. Josten, Cecily & Lordan, Grace, 2024. "Who Makes It to the Top? Differential Rewards to Personality across Gender and Occupation in the UK," IZA Discussion Papers 16754, Institute of Labor Economics (IZA).
    11. Gavoille, Nicolas & Hazans, Mihails, 2022. "Personality Traits, Remote Work and Productivity," IZA Discussion Papers 15486, Institute of Labor Economics (IZA).
    12. Justine Herve & Helene Purcell & Subha Mani, 2023. "Conscientiousness Matters: How does Personality affect Labor Market Outcomes?," Fordham Economics Discussion Paper Series dp2023-05er:dp2023-05, Fordham University, Department of Economics.
    13. Luthra, Renee Reichl & Platt, Lucinda, 2023. "Do immigrants benefit from selection? Migrant educational selectivity and its association with social networks, skills and health," LSE Research Online Documents on Economics 118629, London School of Economics and Political Science, LSE Library.
    14. Josten, Cecily & Krause, Helen & Lordan, Grace & Yeung, Brian, 2024. "What skills pay more? The changing demand and return to skills for professional workers," LSE Research Online Documents on Economics 121450, London School of Economics and Political Science, LSE Library.
    15. Ksenia V. Rozhkova & Natalya Yemelina & Sergey Yu. Roshchin, 2021. "Can Non-Cognitive Skills Explain The Gender Wage Gap In Russia? An Unconditional Quantile Regression Approach," HSE Working papers WP BRP 252/EC/2021, National Research University Higher School of Economics.
    16. Collischon & Matthias, 2018. "Can Personality Traits Explain Glass Ceilings?," SOEPpapers on Multidisciplinary Panel Data Research 965, DIW Berlin, The German Socio-Economic Panel (SOEP).
    17. Brieland, Stephanie & Töpfer, Marina, 2020. "The gender pay gap revisited: Does machine learning offer new insights?," Discussion Papers 111, Friedrich-Alexander University Erlangen-Nuremberg, Chair of Labour and Regional Economics.

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    More about this item

    Keywords

    non-cognitive skills; personality traits; unconditional quantile regression;
    All these keywords.

    JEL classification:

    • C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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