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Biased by success and failure: How unemployment shapes locus of control

Malte Preuss and Juliane Hennecke

Labour Economics, 2018, vol. 53, issue C, 63-74

Abstract: We test the stability of locus of control, a measure that has been attributed substantial explanatory power for economic outcomes since it depicts how much people believe in their ability to affect life outcomes. Using the German Socio-Economic Panel, we find that a job loss due to a plant closure has no long-lasting effect on locus of control. The common assumption of its stability is thus not rejected. However, during unemployment, control perception decreases by 30 percent of one standard deviation. The effect holds true independent from unemployment duration or socio-demographic characteristics and vanishes as soon as the unemployed find a new job. We therefore conclude that stated locus of control is affected by unemployment. Using this trait as explanatory variable can thus lead to biased estimations when this temporary deviation in measurement is not accounted for.

Keywords: Personality; Locus of control; Unemployment; Measurement error (search for similar items in EconPapers)
JEL-codes: C83 J24 J64 J65 (search for similar items in EconPapers)
Date: 2018
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