Personality, Lifetime Earnings, and Retirement Wealth

Authors

Abstract

Studies of adolescents and young adults have shown that schooling impacts economic outcomes beyond its impact on cognitive ability. Research has also shown that the personality trait of conscientiousness predicts health outcomes, academic outcomes, and divorce. Using the Big Five taxonomy of personality traits, this study examines whether non-cognitive traits are related to economic success over the life course. Examining Health and Retirement Study survey data linked to Social Security records on over 10,000 adults age 50 and over, we investigate the relationship of personality traits to economic outcomes. Controlling for cognitive ability and background variables, do more conscientious and emotionally stable adults have higher lifetime earnings, and is this due to higher annual earnings, longer work lives, or both? Do more conscientious adults save a higher proportion of their earnings for retirement, and does conscientiousness of each partner in a married couple matter? Do conscientiousness and emotional stability interact such that the effects of conscientiousness are greater among less emotionally stable adults?

Key Findings

  • More conscientious and emotionally stable adults have higher lifetime earnings.
  • Personality measures account for nearly as much variation in lifetime earnings as do cognitive measures.
  • Conscientiousness and emotional stability interact such that the effects of conscientiousness on lifetime earnings are greater among less emotionally stable adults.
  • In couples, the conscientiousness of husbands and of wives has equal positive effects on wealth.

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Project

Paper ID

WP 2010-235

Publication Type

Working Paper

Publication Year

2010
pavement-enterprise