Labor Market Returns to Personality: A Job Search Approach to Understanding Gender Gaps

Abstract

This paper investigates the effects of the Big Five personality traits on labor market outcomes and gender disparities within a job search, matching and bargaining model with heterogeneous workers. In the model, parameters pertaining to human capital endowments, job offer arrival rates, job dissolution rates and bargaining powers depend on a worker’s education, cognitive skills, personality traits and other demographic characteristics. The model is estimated using data from the German Socio-Economic Panel (GSOEP). Results show that both cognitive and noncognitive traits are important determinants of wage and employment outcomes. For both men and women, higher levels of conscientiousness and emotional stability and lower levels of agreeableness increase hourly wages and promote greater job stability. A decomposition analysis shows that gender differences in two personality traits - agreeableness and emotional stability - account for a substantial proportion (10.7% and 12.0%) of the gender wage gap and that their effect operates largely through the reduction of women’s bargaining power.