Effects of positive attitude and optimism on wage and employment: A double selection approach

Using two samples from the 1979 National Longitudinal Survey of Youth (NLSY79), a longitudinal data set from the United States, and following a double selection approach, the current study estimates the worker's employment and wage equations simultaneously with positive attitude and optimism as additional explanatory variables. Modeling employment as a bivariate decision process, the study examines different factors that influence the worker's labor market participation decision, the employer's hiring decision and the wage rate. The study finds the evidence that the worker's positive attitude and optimism affect the worker's employment probability from different angles: the former through the participation decision and the latter through the hiring decision. Following an alternative approach, this study also provides strong support to the earlier finding that positive attitude affects the worker's wage positively. Interestingly, the effects of attitude variables on the worker's wage are found to be quite comparable in magnitude to the wage effects of the traditional human capital variables.

► The study estimates the worker's employment and wage equations simultaneously.
► Positive attitude and optimism are used as additional explanatory variables.
► The worker's employment probability is modeled as a bivariate probit.
► The wage equation is estimated in a double selection framework.
► Effects of attitude on wage are found to be quite comparable to wage effects of known human capital variables.