LCC Working Paper Series: 2016-20


Rosemary Elkins, Sonja Kassenboehmer and Stefanie Schurer

Non-technical Summary

Personality traits have been shown to predict success in areas such as employment, health, social relationships, and educational attainment. A fundamental assumption in economic decision-making models is that these personality traits are stable over time and do not change in response to life experiences. However, these assumptions have rarely been convincingly tested, especially during adolescence and young adulthood—a critical period of development characterised by dramatic physical and psychosocial changes.

We want to understand how personality traits evolve over this developmentally interesting period, and the degree to which personality traits respond to life experiences. This will help us to understand the value of targeted interventions to shape those non-cognitive skills that are important for positive life outcomes, such as healthy habits and academic success. For example, should schools and universities focus on developing non-cognitive skills of their students? Are such investments worthwhile even into young adulthood when personality is thought to have stabilised?

We focus on the classic ‘Big-Five’ personality traits (conscientiousness, extraversion, openness to experience, emotional stability, and extraversion) as well as a trait called ‘locus of control’, which measures how much a person feels they have control over the outcomes in their life. We use large samples of individuals aged between 15 and 24 from the Household Income and Labour Dynamics in Australia (HILDA) Survey.

We first observe how the personality traits of our sample change on average over an eight-year period and how reliable these shifts are. Most personality traits show small and unreliable changes, with two exceptions. Over the eight-year period, respondents became more conscientious and openness to experience shows an interesting pattern of change that differs by gender.

Next, we estimated the degree to which a number of life experiences, both positive (e.g. improvement in finances) and adverse (e.g. death of a close friend), shaped the personality of our sample. Overall, we find very little evidence that one-off life events systematically influence personality. However, respondents affected by long-term health problems tended to have a more external locus of control (in other words, they tended to believe they had less control over the outcomes in their life), and were less agreeable compared to the rest of the sample.

Finally, we examined how economically meaningful the observed personality changes were, by calculating the ‘marginal probability effect’ of graduating from university. The average increase in conscientiousness that we observe over the adolescent period implies a 7% rise in the probability of obtaining a university degree, which is equivalent to a $7,800 increase in lifetime earnings, although there are important differences between men and women.


September 30, 2016