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The self-reference effect is a tendency for people to encode information differently depending on the level on which the self is implicated in the information. When people are asked to remember information when it is related in some way to the self, the recall rate can be improved.
In 1955, George Kelly published an article on how humans create "personal constructs". This was a more general cognitive theory based on the idea that each individual's psychological processes are influenced by the way they anticipate events. This lays the groundwork for the ideas of personal constructs. Attribution theory  is an explanation of the way people attribute the causes of behavior and events, which also involved creating a construct of self, since people can explain things related to themselves differently than if exactly the same thing happened to someone else. Studies such as one by Jones, Sensening, and Haley  corroborated the idea that the self has a special construct, by simply asking experiment subjects to describe their "most significant characteristics". The results showed that the majority of responses were based on positive characteristics such as "sensitive", "intelligent", and "friendly". This ties in very well with other cognitive phenomena such as Illusory superiority, in that it is a well observed fact that people rate themselves differently than they rate others.
Cortical Mid-line Structures
In recent years, there has been an increase in cognitive neuroscience studies that focus on the concept of the self. These studies were developed in hopes of determining if there are certain brain regions that can account for the encoding advantages involved in the self-reference effect. A great deal of research has been focused on several regions of the brain collectively identified as the cortical midline region. Brain imaging studies have raised the question of whether neural activity in cortical midline regions is self-specific. A quantitative meta-analysis that included 87 studies, representing 1433 participants, was conducted to discuss these questions. The analysis uncovered activity within several cortical midline structures in activities in which participants performed tasks involving the concept of self. Most studies that report such midline activations use tasks that are geared towards uncovering neural processes that are related to social or psychological aspects of the self, such as self-referential judgments, self-appraisal, and judgments of personality traits. Also, in addition to their perceived role in several forms of self-representation, cortical midline structures are also involved in the processing of social relationships and recognizing personally familiar others. Studies that show midline activations during understanding of social interactions between others or ascribing social traits to others (impression formation) typically require subjects to reference the mental state of others.
There are several areas within the cortical midline structure that are believed to be associated with the self-reference effect. One of the more active regions involved in the self-reference effect appears to be the medial prefrontal cortex (mPFC). The prefrontal cortex (PFC) is the area of the brain that is believed to be involved in the planning of complex behavior and the expression and regulation of personality characteristics in social situations. The implication that the prefrontal cortex is involved in the regulation of unique internal personality characteristics illustrates how it may be an important component of the self-reference effect. The medial prefrontal cortex in both hemispheres has been proposed as a site of the “self model” which is a theoretical construct made of essential features such as feelings of continuity and unity as well as experience of agency.
The idea of the self-reference effect being linked to the medial prefrontal cortex stems from several experiments attempting to locate the mechanisms involved in the self-referencing process. Experiments in which participants were assigned tasks that required them to reflect on, or introspect about their own mental states showed activity in the medial prefrontal cortex. For example activity in the ventromedial prefrontal cortex has been observed in tasks in which participants report on their own personalities or preferences, adopt a first person perspective, or reflect on their current affective state. Similar activity in the ventromedial prefrontal cortex is displayed in cases where participants show the memory advantage that emerges when items are encoded in a self-relevant manner. During various functional magnetic resonance imaging(fMRI) tests conducted while participants were performing self-referential tasks, there was a consistent showing of increases in BOLD signals in the ventral medial and dorsal medial prefrontal cortex.  Measuring BOLD signals is necessary for a sound interpretation of fMRI signals, as BOLD fMRI reflects a complex monitoring of changes in cerebral blood flow, cerebral blood volume and blood oxygenation. 
In addition to areas of the prefrontal cortex, research has suggested that there are areas within the parietal lobe that also play a role in activating the self-reference effect. During fMRI given during self-referential tasks there also appeared to be increases in BOLD signals within the medial and lateral parietal cortex To further determine whether or not the medial parietal lobe plays a role in self-referencing, participants were subjected to transcranial magnetic stimulation(TMS) over the region. Stimulation over this region produced a decrease in the ability of participants to retrieve previous judgments of mental self when compared to the retrieval of judgment of others. 
The development of a sense of self and the understanding that one is separate and uniquely different from others is vital in the in the development of the self-reference effect advantage. As young children grow, their sense of self and understanding of the world around them is continuously increasing. Although this occurs at different stages for each child, research has shown rather early development of the self-reference advantage. Research focusing on the recall abilities of children have shown the self-referencing advantage in children as young as five years old.  Language development appears to play a significant role in the development and use of the self-reference effect. Verbal labeling is among the first strategic behaviors shown by young children in order to enhance memory, and as children progress in age and language development, their performance on memory tasks involving self-referencing increases. 
Like children, the continuous development of a self-concept is related to the development of self-referencing in individuals. The relationships formed with intimate others over the lifespan appear to have an effect on self-referencing in relation to memory. The extent to which we include others in our self-concept has been a topic of particular interest for social psychologists. Theories of intimacy and personal relationships might suggest that the self-reference effect is affected by the closeness of a relationship with the other used as a target. Some researchers define closeness as an extension of self into other and suggest that one's cognitive processes about a close other develop in a way so as to include that person as part of the self. Consistent with this idea, it has been demonstrated that the memorial advantage afforded to self-referenced material can be diminished or eliminated when the comparison target is an intimate other such as a parent, friend, or spouse  The capacity for utilizing the self-reference effect remains relatively high throughout the lifespan, even well into old age. Normally functioning older adults can benefit from self-referencing. Ageing is marked by cognitive impairments in a number of domains including long-term memory, but older adults’ memory performance is malleable. Memory strategies and orientations that engage ‘‘deep’’ encoding processes benefit older adults. For example, older adults exhibit increased recall when using self-generated strategies that rely on personally relevant information (e.g., important birthdates) relative to other mnemonic strategies However, research has shown that there are some differences between older adults and younger adults use of the self-reference advantage. Like young adults, older adults exhibit superior recognition for self-referenced items. But the amount of cognitive resources an individual has influence on how much older adults benefit from self referencing. Self-referencing improves older adult’s memory, but its benefits are restricted regarless of the social and personally relevant nature of the task.  A reason for this change in self referencing may be the change in brain activation that has been observed in older adults when studying self-referencing. Older adults showed more activity in the medial prefrontal cortex and along the cingulate gyrus than young adults. Because these regions often are associated with self-referential processing, these results suggest that older adults’ mnemonic boost for positive information may stem from an increased tendency to process this information in relation to themselves. It has been proposed that this ‘‘positivity shift’’ may occur because older adults put more emphasis on emotion regulation goals than do young adults, with older adults having a greater motivation to derive emotional meaning from life and to maintain positive affect.