I remember reading about a study where people who are below average at a task tended to rate themselves as competent (or better than average) for that task, while more competent people wold under-rate themselves.
There are all sorts of possible explanations (don't know enough to know you suck, pride, etc) and I don't think the study really looked at causality at all, but yes, I think the phenomenon is well known.
The study you're thinking of is probably "Unskilled and Unaware of It: How Difficulties in Recognizing One's Own
Incompetence Lead to Inflated Self-Assessments" - it's completely fascinating and slightly worrying.
There are all sorts of possible explanations (don't know enough to know you suck, pride, etc) and I don't think the study really looked at causality at all, but yes, I think the phenomenon is well known.