Metadata

• Authors: Daniel Connolly, Samantha Horn, George Loewenstein
• Publication Date: August 05, 2024
• Journal/Source: SSRN
• URL: https://ssrn.com/abstract=4916412

Abstract

Across five controlled experiments, we investigate the accuracy of beliefs about skill decay. Participants consistently underestimated their own skill decay by 28% to 59% across tasks. Even after directly experiencing skill decay, participants continued to underpredict its extent. We identify two mechanisms driving this underestimation: First, participants were more accurate in predicting others’ skill decline than their own, suggesting ego-based motivations are at play. Second, both subgroup heterogeneity and variable importance analyses reveal an underappreciation of the adverse impact of age on skill decay. Together, these findings suggest systematic misjudgments of skill retention, with implications for human capital investment decisions.

Key Findings

• Participants underestimated their own skill decay by 28% to 59% across various tasks.
• Ego-based motivations lead to a more accurate prediction of others’ skill decline compared to one’s own.
• The adverse impact of age on skill decay is underappreciated, affecting judgments of skill retention.

Notes

• The study consists of five controlled experiments.
• The research highlights implications for human capital investment decisions based on skill retention misjudgments.
• Subgroup heterogeneity and variable importance analyses were utilized to identify mechanisms of underestimation.