Scandinavian Working Papers in Economics
Working Papers in Economics and Statistics,
Linnaeus University, School of Business and Economics, Department of Economics and Statistics
No 4/2025: Overconfidence and Gender Gaps in Career Outcomes: Insights from a Promotion-Signaling Model
Spencer Bastani (), Thomas Giebe () and Oliver Gürtler ()
Additional contact information
Spencer Bastani: Institute for Evaluation of Labour Market and Education Policy (IFAU) and Department of Economics, Uppsala University; Research Institute for Industrial Economics (IFN)
Thomas Giebe: Department of Economics and Statistics, Postal: Department of Economics and Statistics, School of Business and Economics, Linnaeus University, 351 95 Växjö, Sweden
Oliver Gürtler: Department of Economics, University of Cologne
Abstract: Although gender differences in overconfidence have been extensively documented in empirical research, their consequences for labor market outcomes remain underexplored in the theoretical literature. This paper develops a promotion-signaling model with competitive incentives and endogenously determined wages to examine how men's relatively higher overconfidence contributes to gender differences in career advancement and earnings. Our theoretical results show that overconfident workers exert more effort, are promoted more often, and earn higher wages across hierarchical levels, despite having lower expected ability conditional on promotion. This increased effort also promotes human capital accumulation through learning-by-doing, which ultimately increases productivity. At the same time, overconfidence acts as a double-edged sword: while it facilitates favorable career outcomes through higher promotion probabilities and wages, it also imposes greater effort costs and can discourage peers, potentially undermining overall outcomes in certain contexts.
Keywords: overconfidence; promotion; competition; gender gap; tournament
JEL-codes: C72; D91; J16; J24; M51; M52
Language: English
58 pages, December 18, 2025
Full text files
25-04_Overconfidence..._signaling_model.pdfFull text
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