Scandinavian Working Papers in Economics

Working Papers in Economics,
University of Gothenburg, Department of Economics

No 627: Estimating the Relationship between Skill and Overconfidence

Jan Feld (), Jan Sauermann and Andries De Grip
Additional contact information
Jan Feld: Department of Economics, School of Business, Economics and Law, Göteborg University, Postal: P.O. Box 640, SE 40530 Gothenburg, Sweden
Jan Sauermann: Research Centre for Education and the Labour Market (ROA), Maastricht University. c Swedish Institute for Social Research (SOFI), Stockholm University d Institute for the Study of Labour (IZA), Bonn
Andries De Grip: Research Centre for Education and the Labour Market (ROA), Maastricht University and Institute for the Study of Labour (IZA), Bonn

Abstract: The Dunning–Kruger effect states that the low skilled are overconfident while the high skilled are more accurate in assessing their skill. In apparent support of this effect, many studies have shown that low performers overestimate their performance while high performers are more accurate. This empirical pattern, however, might be a statistical artifact caused by measurement error. We are the first paper to consistently estimate the Dunning–Kruger effect using an instrumental variable approach. In the context of exam grade predictions of economics students, we use students’ grade point average as an instrument for their skill. Our results support the existence of the Dunning–Kruger effect.

Keywords: Overconfidence; judgment error; measurement error; instrumental variable

JEL-codes: D03; I23

19 pages, September 2015

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Published as
Jan Feld, Jan Sauermann and Andries De Grip, (2017), 'Estimating the Relationship between Skill and Overconfidence', Journal of Behavioural and Experimental Economics, vol 68, pages 18-24

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