Cognitive and Non-Cognitive Skills for the Peruvian Labor Market : Addressing Measurement Error through Latent Skills Estimations
Evidence from developed country data suggests that cognitive and non-cognitive skills contribute to improved labor market outcomes. This paper tests this hypothesis in a developing country by using an individual-level data set from Peru that incorp...
| Main Authors: | , , |
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| Format: | Working Paper |
| Language: | English en_US |
| Published: |
World Bank, Washington, DC
2016
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/2016/02/25855104/cognitive-non-cognitive-skills-peruvian-labor-market-addressing-measurement-error-through-latent-skills-estimations http://hdl.handle.net/10986/23725 |
| Summary: | Evidence from developed country data
suggests that cognitive and non-cognitive skills contribute
to improved labor market outcomes. This paper tests this
hypothesis in a developing country by using an
individual-level data set from Peru that incorporates
modules to measure cognitive and non-cognitive skills. The
paper estimates a structural latent model with unobserved
heterogeneity to capture full ability rather than just
measured skill. It also applies standard ordinary least
squares techniques for comparison. The analysis confirms
that cognitive and non-cognitive skills are positively
correlated with a range of labor market outcomes in Peru. In
particular, cognitive skills positively correlate with wages
and the probability of being a wage worker, white-collar,
and formal worker, with verbal fluency and numeric ability
playing particularly strong roles. The results are robust to
methodology. The patterns are less uniform for non-cognitive
skills. For instance, perseverance of effort (grit) emerges
strongly for most outcomes regardless of methodology.
However, plasticity—an aggregation of openness to experience
and emotional stability—is only correlated with employment,
and only when using the structural latent model. The
ordinary least squares method also finds that the
disaggregated non-cognitive skills of kindness, cooperation,
emotional stability, and openness to experience emerge
significantly, mostly for the wage estimates. The different
results derived from the ordinary least squares and the
structural model with latent skills suggest strong
measurement bias in most non-cognitive skills measurement.
These findings, although only correlational because of the
use of a single cross-section, suggest that recent efforts
by the Peruvian government to incorporate non-cognitive
skill development into the school curriculum are justified. |
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