Labor Market Returns and the Evolution of Cognitive Skills: Theory and Evidence

Hermo, Santiago; Seim, David; Shapiro, Jesse M.

doi:10.3386/w29135

Cited by 1 publication

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“…The positive relationship between human capital and earnings is one of the most robust findings in the social sciences (Deming, 2022), and is supported by a large body of work (e.g., Mincer, 1958;Griliches, 1977;Card, 1999Card, , 2001. While early studies focused on aggregate measures of human capital-like years of schooling-more recent work has focused on estimating the economic returns to specific skills, such as social skills (Deming, 2017) or cognitive skills (Hermo et al, 2022). Identifying skills that foster productivity is essential for the design of effective education and labor-market policies (Almlund et al, 2011;Kautz et al, 2014).…”

Section: Introductionmentioning

confidence: 94%

“…This paper also contributes to a growing literature documenting the importance of different dimensions of human capital for long-run outcomes. A large body of work shows that cognitive skills are valuable in the labor market (e.g., Woessmann, 2008, 2012;Fe et al, 2022;Hermo et al, 2022). This work often uses test scores as a measure of cognitive skills.…”

Section: Introductionmentioning

confidence: 99%

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Cognitive Endurance, Talent Selection, and the Labor Market Returns to Human Capital

Reyes¹

2023

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Cognitive endurance-the ability to sustain performance on a cognitively-demanding task over time-is thought to be a crucial productivity determinant. However, a lack of data on this variable has limited researchers' ability to understand its role for success in college and the labor market. This paper uses college-admission-exam records from 15 million Brazilian high school students to measure cognitive endurance based on changes in performance throughout the exam. By exploiting exogenous variation in the order of exam questions, I show that students are 7.1 percentage points more likely to correctly answer a given question when it appears at the beginning of the day versus the end (relative to a sample mean of 34.3%). I develop a method to decompose test scores into fatigue-adjusted ability and cognitive endurance. I then merge these measures into a higher-education census and the earnings records of the universe of Brazilian formal-sector workers to quantify the association between endurance and long-run outcomes. I find that cognitive endurance has a statistically and economically significant wage return. Controlling for fatigue-adjusted ability and other student characteristics, a one-standard-deviation higher endurance predicts a 5.4% wage increase. This wage return to endurance is sizable, equivalent to a third of the wage return to ability. I also document positive associations between endurance and college attendance, college quality, college graduation, firm quality, and other outcomes. Finally, I show how systematic differences in endurance across students interact with the exam design to determine the sorting of students to colleges. I discuss the implications of these findings for the use of cognitive assessments for talent selection and investments in interventions that build cognitive endurance.

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