Working Paper: NBER ID: w21695
Authors: Ernesto Reuben; Paola Sapienza; Luigi Zingales
Abstract: We study whether and when preferences for competition are a positive economic trait among high-earners and to what extent this trait can explain the gender gap in income among MBAs. Consistent with the experimental evidence, preferences for competition are a positive economic trait only for non-overconfident individuals. Preferences for competition correlate with income only at graduation when bonuses are guaranteed and not a function of performance. Overconfident, competition loving MBAs have lower compensation and income growth, and experience greater exit from high-reward industries and more frequent job interruptions. Preferences for competition do not explain the gender pay gap among MBAs.
Keywords: overconfidence; preferences for competition; gender gap; income
JEL Codes: C93; D81; D84; I21; J16
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| preferences for competition (L13) | income at graduation (D29) |
| overconfidence + preferences for competition (D91) | lower compensation and income growth (J31) |
| overconfidence + preferences for competition (D91) | more likely to exit high-reward industries (L19) |
| preferences for competition (L13) | gender pay gap (J31) |
| overconfidence + preferences for competition (D91) | negative effect on realized income (H31) |
| below-average overconfidence (D80) | earn significantly more (J31) |
| preferences for competition + not overconfidence (D81) | beneficial in high pay-for-performance jobs (J33) |
| preferences for competition (L13) | gender income gap seven years post-graduation (J31) |