Myth or fact? The beauty premium across the wage distribution

We apply an innovative technique to allow for differential effects of physical appearance and self-confidence across the wage distribution, as traditional methods can confound opposing effects at either end of the wage distribution. Comparing the effects of beauty and confidence measures in two countries (Germany and Luxembourg), we find that wages are more driven by looks than self-esteem. Counterfactual wage distributions, constructed using distribution regression, show a beauty premium for women at the bottom of the wage distribution. However, most of this is explained by the fact that attractive women have better labor market attributes than their unattractive counterparts. We find a large wage premium for attractive men throughout the wage distribution which is largely unexplained by labor market attributes. There is a small wage penalty for self-confident individuals, particularly men, although their labor market characteristics are generally better than their less confident counterparts. We show that the difference in characteristics between beautiful and plain people contributes to the beauty premium identified using traditional models, particularly for women. Isolating the characteristic effect from the unexplained effect of beauty on wages leads to smaller beauty premium for women.