That self-esteem is an important non-cognitive skill valued in the labor market is well known (see, e.g. Drago, 2011; Goldsmith, Veum, & Darity, 1997; Heckman, Stixrud, & Urzua, 2006; Murnane, Willett, Braatz, & Duhaldeborde, 2001). These findings underscore the importance of learning more about the formation of self-esteem. To understand the role of education in the formation of self-esteem, we study the impact of finishing or dropping out of college on self-esteem. The research on the effect of education on self-esteem in general is ambiguous (see, e.g. de Araujo & Lagos, 2013; Heckman, Humphries, Veramendi, & Urzua, 2014). To explicitly investigate the effect on self-esteem of dropping out of and graduating from college, we differentiate the group commonly labeled “some college” by separating four- and two-year college dropouts and two-year college graduates in different groups. Using data spanning three decades from the U.S. National Longitudinal Survey of Youth and applying linear and nonlinear estimation methods, we find that dropping out of a four-year college significantly reduces self-esteem compared to graduating, regardless of whether the four-year college dropouts obtain an associate’s degree or not. In contrast, two-year college graduates, who never enrolled in a four-year college, experience no such decrease in self-esteem. In summary, all students, who do not finish the highest type of college ever enrolled in experience a negative effect on self-esteem. We show short-term and long-term effects, i.e. effects when the individuals are in their 20ths and in their 40ths, respectively. Moreover, we prove the general result that self-esteem has a causal effect on wages for our sample. Our research implies that two-year college degrees are an efficient means of developing self-esteem, and, more general, that it is important to finish the highest type of college ever enrolled. This conclusions carry implications for college enrollment decisions.
de Araujo, P., & Lagos, S. (2013). Self-Esteem, Education, and Wages Revisited. Journal of Economic Psychology, 34, 120–132.
Drago, F. (2011). Self-Esteem and Earnings. Journal of Economic Psychology, 32(3), 480–488.
Goldsmith, A. H., Veum, J. R., & Darity, W., Jr. (1997). The Impact of Psychological and Human Capital on Wages. Economic Inquiry, 35(4), 815–829.
Heckman, J. J., Humphries, J. E., Veramendi, G., & Urzua, S. (2014). Education, Health and Wages. NBER Working Paper Series. No. 19971.
Heckman, J. J., Stixrud, J., & Urzua, S. (2006). The Effects of Cognitive and Noncognitive Abilities on Labor Market Outcomes and Social Behavior. Journal of Labor Economics, 24(3), 411–482.
Murnane, R. J., Willett, J. B., Braatz, M. J., & Duhaldeborde, Y. (2001). Do Different Dimensions of Male High School Students' Skills Predict Labor Market Success a Decade Later? Evidence From the NLSY. Economics of Education Review, 20(4), 311–320.