Cognitive Performance and Labor Market Outcomes

67 Pages Posted: 8 Aug 2016

See all articles by Dajun Lin

Dajun Lin

University of Virginia - Department of Economics

Randall Lutter

American Enterprise Institute (AEI); AEI-Brookings Joint Center for Regulatory Studies

Christopher J. Ruhm

University of Virginia - Frank Batten School of Leadership and Public Policy; National Bureau of Economic Research (NBER); IZA Institute of Labor Economics

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Abstract

We use information from the National Longitudinal Survey of Youth 1979 (NLSY79) and supplementary data sources to examine how cognitive performance, measured at approximately the end of secondary schooling, is related to the labor market outcomes of 20 through 50 year olds. Our estimates control for a wide array of individual and family background characteristics, a limited set of non-cognitive attributes, survey year dummy variables and, sometimes, geographic place effects. The analysis reveals five main findings. First, cognitive performance is positively associated with future labor market outcomes at all ages. The relationship is attenuated but not eliminated by the addition of controls for non-cognitive characteristics, while the inclusion of place effects does not change the estimated associations. Second, the returns to cognitive skill increase with age. Third, the effect on total incomes reflects a combination of positive impacts of cognitive performance for both hourly wages and annual work hours. Fourth, the returns to cognitive skill are greater for women than men and for blacks and Hispanics than for non-Hispanic whites, with differential effects on work hours being more important than corresponding changes in hourly wages. Fifth, the average gains in lifetime incomes predicted to result from greater levels of cognitive performance are only slightly above those reported in prior studies but the effects are heterogeneous, with larger relative and absolute increases, in most models, for nonwhites or Hispanics than for non-Hispanic whites, and higher relative but not absolute returns for women than men.

Keywords: cognitive performance, cognitive skill, labor market outcomes, labor income, earnings, work hours

JEL Classification: J23, J24, J31, J38

Suggested Citation

Lin, Dajun and Lutter, Randall and Ruhm, Christopher J., Cognitive Performance and Labor Market Outcomes. IZA Discussion Paper No. 10075, Available at SSRN: https://ssrn.com/abstract=2819356

Dajun Lin (Contact Author)

University of Virginia - Department of Economics ( email )

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Randall Lutter

American Enterprise Institute (AEI) ( email )

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AEI-Brookings Joint Center for Regulatory Studies

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Christopher J. Ruhm

University of Virginia - Frank Batten School of Leadership and Public Policy ( email )

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P.O. Box 400893
Charlottesville, VA 22904-4893
United States
434-924-7581 (Phone)

HOME PAGE: http://batten.virginia.edu/cruhm.html

National Bureau of Economic Research (NBER) ( email )

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IZA Institute of Labor Economics ( email )

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