THE IMPACT OF PSYCHOLOGICAL AND HUMAN CAPITAL ON WAGES

Authors

  • ARTHUR H. GOLDSMITH,

    1. Washington and Lee University, Lexington, Va., Phone 1–540-463-8970, Fax 1–540-463-8639, E-mail goldsmith.a.h@wlu.edu
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  • JONATHAN R. VEUM,

    1. U.S. Bureau of Labor Statistics, Washington, D.C., Phone 1–202-606-7387, Fax 1–202-606-6425, E-mail veum_j@bls.gov
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  • WILLIAM DARITY JR.

    1. The University of North Carolina, Chapel Hill, Phone 1–919-966-2156, Fax 1–919-966-4986, E-mail darity.cpc@mhs.unc.edu
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    • *The authors are indebted to Stuart Low for his insights and advice during the formative stage of this research. Tony Hall offered valuable insights and suggestions during numerous discussions of this project. They also wish to thank two anonymous referees for their useful comments and suggestions. This paper was written while Goldsmith was a Visiting Professor of Economics at Bond University, Gold Coast Australia, and Victoria University of Wellington, New Zealand. This research was supported, in part, by a R. E. Lee Summer Research Grant from Washington and Lee University. Finally, the views expressed in this paper are those of the authors and do not reflect the policies or views of the U.S. Bureau of Labor Statistics.


Abstract

Historically, economists have taken the position that psychological capital is either unobservable or immeasurable; thus, heretofore, little evidence has been available on the contribution of psychological capital to wages. Using data drawn from two different waves of the National Longitudinal Survey of Youth, we offer evidence that psychological capital has both a direct effect—via self-esteem—and an indirect effect—through locus of control—on an individual's real wage. We find a person s wage is more sensitive to changes in self-esteem than to comparable alterations in human capital. Both relative wages and human capital contribute to self-esteem.

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