nep-hap New Economics Papers
on Economics of Happiness
Issue of 2023‒05‒01
one paper chosen by
Viviana Di Giovinazzo
Università degli Studi di Milano-Bicocca

  1. Accounting For Individual-Specific Reliability of Self-Assessed Measures of Economic Preferences and Personality Traits By Dohmen, Thomas; Jagelka, Tomáš

  1. By: Dohmen, Thomas (University of Bonn and IZA); Jagelka, Tomáš (University of Bonn)
    Abstract: Measures based on self-assessments, which are increasingly important in empirical economic research, are plagued by measurement error. This paper presents the first attempt at measuring both revealed and self-reported reliability of individuals' answers on self-reports of latent characteristics. We show that measurement error on self-reports relevant to economists is heterogeneous across individuals and can be reasonably approximated by a distribution with two unobserved types. We propose a straightforward survey question which allows to distinguish individuals who give highly reliable answers from those who do not, using cross-sectional data. We demonstrate that it predicts revealed individual reliability over and above all measured characterises, survey conditions, and experimental treatments. We show how our simple self-reported reliability measure can be used to cost-effectively reduce attenuation bias in estimates of cognitive and non-cognitive determinants of high school GPA, college graduation, unemployment, and life satisfaction. Without requiring panel data, the achieved correction is similar to some of the most effective reduced-form theory-based approaches in the existing literature. Finally, we clarify the role of effort and self-knowledge in generating measurement error and propose a simple model which rationalizes our findings.
    Keywords: measurement error, reliability, personality traits, economic preferences
    JEL: D90 C81 C83
    Date: 2023–03

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