THE IMPACT OF PSYCHOLOGICAL AND HUMAN-CAPITAL ON WAGES

Historically, economists have taken the position that psychological ca pital is either unobservable or unmeasurable; thus, heretofore, little evidence has been available on the contribution of psychological capi tal to wages. Using data drawn from two different waves of the Nationa l Longitudinal Survey of Youth, we offer evidence that psychological c apital has both a direct effect-via self-esteem-and an indirect effect -through locus of control-on an individual's real wage. We find a pers on's wage is move sensitive to changes in self-esteem than to comparab le alterations in human capital. Both relative wages and human capital contribute to self-esteem.