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Research Institute of Industrial Economics (IFN) Working Paper Series

No 613:
Trapped, Delayed and Handicapped

Anna Sjögren () and Susanna Sällström ()

Abstract: The dynamics of self-confidence are modelled in an environment where rational individuals optimally choose educations and occupations with the aim to acquire productive skills while learning about ability. It is shown how the presence of uninformative options can trap individuals below their potential. Furthermore, the trade-off between probability of success and value of skills may induce uncertain individuals to acquire less productive skills on their way to ability intensive occupations. The value of information also induces uncertain individuals to delay their labor market entry. The model can explain differences in perseverance in the face of failure.

Keywords: Self-Confidence; Self-Selection; Skill Accumulation; Bayesian Learning; (follow links to similar papers)

JEL-Codes: D83; J24; (follow links to similar papers)

42 pages, March 16, 2004

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