Returns to Skills around the World: Evidence from PIAAC

Eric Hanushek, Guido Schwerdt, Simon Wiederhold () and Ludger Woessmann

No 7850, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: Existing estimates of the labor-market returns to human capital give a distorted picture of the role of skills across different economies. International comparisons of earnings analyses rely almost exclusively on school attainment measures of human capital, and evidence incorporating direct measures of cognitive skills is mostly restricted to early-career workers in the United States. Analysis of the new PIAAC survey of adult skills over the full lifecycle in 22 countries shows that the focus on early-career earnings leads to underestimating the lifetime returns to skills by about one quarter. On average, a one-standard-deviation increase in numeracy skills is associated with an 18 percent wage increase among prime-age workers. But this masks considerable heterogeneity across countries. Eight countries, including all Nordic countries, have returns between 12 and 15 percent, while six are above 21 percent with the largest return being 28 percent in the United States. Estimates are remarkably robust to different earnings and skill measures, additional controls, and various subgroups. Intriguingly, returns to skills are systematically lower in countries with higher union density, stricter employment protection, and larger public-sector shares.

Keywords: education; labor market; earnings; international comparisons; cognitive skills (search for similar items in EconPapers)
JEL-codes: I20 J31 (search for similar items in EconPapers)
Pages: 47 pages
Date: 2013-12
New Economics Papers: this item is included in nep-dem, nep-edu, nep-hrm, nep-lab, nep-lma and nep-ltv
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (23)

Published - published in: European Economic Review, 2015, 73, 103-130

Downloads: (external link)
https://docs.iza.org/dp7850.pdf (application/pdf)

Related works:
Journal Article: Returns to skills around the world: Evidence from PIAAC (2015)
Working Paper: Returns to Skills around the World: Evidence from PIAAC (2014)
Working Paper: Returns to Skills around the World: Evidence from PIAAC (2014)
Working Paper: Returns to Skills Around the World: Evidence From PIAAC (2013)
Working Paper: Returns to Skills around the World: Evidence from PIAAC (2013)
Working Paper: Returns to Skills Around the World: Evidence from PIAAC (2013)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:iza:izadps:dp7850

Ordering information: This working paper can be ordered from
IZA, Margard Ody, P.O. Box 7240, D-53072 Bonn, Germany

Access Statistics for this paper

More papers in IZA Discussion Papers from Institute of Labor Economics (IZA) IZA, P.O. Box 7240, D-53072 Bonn, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Holger Hinte ().