Friday, July 27, 2012

Self-confident children have it best

Being self-confident matters in life: with higher self-esteem, you are more likely to become an entrepreneur, and as a CEO you invest more in innovation. Also, self-confidence may be attributed to some physical attributes of males, which are correlated with growth, and this could also explain why tall and beautiful people are more successful. But when does it all start to matter? In other words, when is the bifurcation of confident and non-confident people happening? Indeed, confidence may be self-fulfilling and self-reinforcing.

According to Antonio Filippin and Marco Paccagnella, self-confidence can matter very early in life. This conclusion is based on theoretical work, using a model of Bayesian learning about one's abilities. If the learning process does not converge quickly towards the truth, small initial differences in confidence can lead to permanent differences as human capital choices are made along the way. This is consistent with empirical observations about the persistence of earnings across generations. What is the policy prescription? Have cognitive tests early, so as to get bright kids to get a good education no matter what their initial confidence (or that of their parents) is.

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