Temperament traits and economic preferences predict occupational choice beyond human capital variables

Abstract

Standard labor market models have mainly focused on human capital theory, which emphasizes the role of education, experience, and individuals’ different skill levels in determining occupational choice. The recent literature, however, has shown that noncognitive (“soft”) skills are also strong predictors for vocational behavior. Economics provides little guidance on the effects of noncognitive skills on occupational choice. In applied psychology, personality/temperament traits and economic preferences refer to the characteristics explaining how individuals may act differently in similar situations related to occupational choice. We utilize the Northern Finland Birth Cohort 1966 (n = 4,731 to 5,882) to explore the value of incorporating temperament traits and economic preferences in occupational choice. We explore whether temperament traits contribute to occupational choice, using data from the NFBC1966 for the years 2004 to 2012, inclusive. Occupational groups are chosen to be distinct with respect to the requisite skills, education levels, and tasks. The novelty of our data allows us to determine whether temperament traits and economic preferences have significant impacts on occupational choice, while controlling for other variables related to the human capital approach. We find that temperament traits and economic preferences are important contributors of vocational behavior. Our analysis highlights that it is important to jointly explore the effects of the human capital model, noncognitive traits and other nonpecuniary factors in analyzing occupational choices among individuals. We reveal distinct temperament traits for different occupations. To our knowledge, there exists no evidence about how individuals’ temperament traits, economic preferences, and the human capital approach jointly are sorted into occupational choices. In addition, the novelty of our data allows us to include education, among other factors, to control our findings. We find significant differences across occupations regarding temperament traits.