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Are Economists' Preferences Psychologists' Personality Traits? A Structural Approach

Tomáš Jagelka ()
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Tomáš Jagelka: University of Bonn

No 13303, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: This paper proposes a method for empirically mapping psychological personality traits to economic preferences. Careful modelling of random components of decision making is crucial to establishing the long supposed but empirically elusive link between economic and psychological systems for understanding differences in individuals' behavior. I use factor analysis to extract information on individuals' cognitive ability and personality and embed it within a Random Preference Model to estimate distributions of risk and time preferences, of their individual-level stability, and of people's propensity to make mistakes. I explain up to 50% of the variation in both average risk and time preferences and in individuals' capacity to make consistent rational choices using four factors related to cognitive ability and three of the Big Five personality traits. True differences in desired outcomes are related to differences in personality whereas actual mistakes in decisions are related to cognitive skill.

Keywords: stochastic discrete choice; measurement error; decision error; personality traits; economic preferences (search for similar items in EconPapers)
JEL-codes: D01 D80 D91 (search for similar items in EconPapers)
Pages: 59 pages
Date: 2020-05
New Economics Papers: this item is included in nep-cbe, nep-dcm, nep-hpe, nep-neu, nep-ore and nep-upt
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