Labor Market Information Provision and Job FairsService Sector Female Labor Preference

Managerial Overconfidence and Self-Assessment Bias

Download image · 1200 × 630 PNG

In Simple Words

Imagine a driver who rates themselves an expert driver, yet regularly gets into fender benders and fails basic parallel parking tests because they have never seen what professional driving looks like.

Same firms, two management ratings

Managers rated their own firms
Average self-rating: 7.1 of 10
Interviewers scored practices
Scores did not track self-ratings

Observed survey records. Self-rating scale called 5 average. Different scales; not proof every manager overestimated.

See source →Management survey — Bloom and Van Reenen ↗

Research question

Firm managers in developing countries overestimate the quality of their operational practices, scoring themselves high on performance surveys despite operating under demonstrably poor standards.

Participants

Cross-country double-blind survey of manufacturing firms (BSVR methodology).

Study Design

Comparison of self-reported manager performance ratings against objective double-blind external management practice evaluations.

Results

Prior to consulting interventions, firm managers consistently rated their own management practices as "above average," preventing them from recognizing the need to seek or invest in external managerial improvements.

Takeaway

Utilize objective third-party operational benchmarking audits to evaluate plant management quality rather than relying on self-reported manager appraisals.

Source and citation

See source →

Related findings

  • Administrative Social Security Data Linkage for Earnings Measurement →Economics (general)

    Instead of asking individuals to remember and report exact yearly income numbers from a decade ago, researchers obtain signed consent to link survey profiles directly to official government tax records. This creates an unalterable, objective earnings ledger covering years before and after a financial event.

  • Agnostic Machine Learning Heterogeneity Detection in Field Trials →Economics (general)

    Evaluating a program using only average results is like measuring the average temperature of a room with one frozen wall and one burning wall and concluding the room is comfortable. Machine learning acts like a thermal camera, splitting the room into sections to reveal the extreme cold and extreme heat hiding behind the average.

  • Asymmetric Wealth Effect of Subsidized Index Contracts →Economics (general)

    Imagine buying a lottery ticket that costs $1, but pays out $1,000 if a major storm hits. Paying $1 during normal weather is so cheap that it does not change weekly spending or force extra work hours to make up for the cost.

  • Audit-Protected Performance Measurement →Economics (general)

    Imagine a classroom exam where students know that random answer sheets will be double-checked by independent outside inspectors; unpredictable audits prevent students from cheating or making fake arrangements with graders.