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Estimating the relationship between skill and overconfidence

dc.contributor.authorFeld, Jan
dc.contributor.authorSauermann, Jan
dc.contributor.authorDe Grip, Andries
dc.date.accessioned2017-03-21T00:31:28Z
dc.date.accessioned2022-07-11T21:22:18Z
dc.date.available2017-03-21T00:31:28Z
dc.date.available2022-07-11T21:22:18Z
dc.date.copyright2017
dc.date.issued2017
dc.description.abstractThe Dunning–Kruger effect states that low performers vastly overestimate their performance while high performers more accurately assess their performance. Researchers usually interpret this empirical pattern as evidence that the low skilled are vastly overconfident while the high skilled are more accurate in assessing their skill. However, measurement error alone can lead to a negative relationship between performance and overestimation, even if skill and overconfidence are unrelated. To clarify the role of measurement error, we restate the Dunning–Kruger effect in terms of skill and overconfidence. We show that we can correct for bias caused by measurement error with an instrumental variable approach that uses a second performance as instrument. We then estimate the Dunning–Kruger effect in the context of the exam grade predictions of economics students, using their grade point average as an instrument for their exam grade. Our results show that the unskilled are more overconfident than the skilled. However, as we predict in our methodological discussion, this relationship is significantly weaker than ordinary least squares estimates suggest.en_NZ
dc.formatpdfen_NZ
dc.identifier.urihttps://ir.wgtn.ac.nz/handle/123456789/20145
dc.language.isoen_NZ
dc.publisherTe Herenga Waka—Victoria University of Wellingtonen_NZ
dc.relation.ispartofseriesSEF Working paper ; 05/2017en_NZ
dc.rights.rightsholderhttp://www.victoria.ac.nz/sef/research/sef-working-papersen_NZ
dc.subjectDunning–Kruger effecten_NZ
dc.subjectOverconfidenceen_NZ
dc.subjectJudgment erroren_NZ
dc.subjectMeasurement erroren_NZ
dc.subjectInstrumental variableen_NZ
dc.titleEstimating the relationship between skill and overconfidenceen_NZ
dc.typeTexten_NZ
vuwschema.contributor.unitSchool of Economics and Financeen_NZ
vuwschema.subject.anzsrcfor140211 Labour Economicsen_NZ
vuwschema.subject.anzsrcforV2380111 Labour economicsen_NZ
vuwschema.type.vuwWorking or Occasional Paperen_NZ

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