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

Santiago Hermo, Miika M. Päällysaho, David G. Seim and Jesse Shapiro

No 29135, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: A large literature in cognitive science studies the puzzling “Flynn effect” of rising fluid intelligence (reasoning skill) in rich countries. We develop an economic model in which a cohort’s mix of skills is determined by different skills’ relative returns in the labor market and by the technology for producing skills. We estimate the model using administrative data from Sweden. Combining data from exams taken at military enlistment with earnings records from the tax register, we document an increase in the relative labor market return to logical reasoning skill as compared to vocabulary knowledge. The estimated model implies that changes in labor market returns explain 37 percent of the measured increase in reasoning skill, and can also explain the decline in knowledge. An original survey of parents, an analysis of trends in school curricula, and an analysis of occupational characteristics show evidence of increasing emphasis on reasoning as compared to knowledge.

JEL-codes: J24 J31 O52 (search for similar items in EconPapers)
Date: 2021-08
New Economics Papers: this item is included in nep-edu, nep-isf, nep-lma, nep-ltv and nep-neu
Note: LS
References: Add references at CitEc
Citations: View citations in EconPapers (1)

Published as Santiago Hermo & Miika Päällysaho & David Seim & Jesse M Shapiro, 2022. "Labor Market Returns and the Evolution of Cognitive Skills: Theory and Evidence," The Quarterly Journal of Economics, vol 137(4), pages 2309-2361.

Downloads: (external link)
http://www.nber.org/papers/w29135.pdf (application/pdf)

Related works:
Journal Article: Labor Market Returns and the Evolution of Cognitive Skills: Theory and Evidence (2023)
Working Paper: Labor Market Returns and the Evolution of Cognitive Skills: Theory and Evidence (2022)
Working Paper: Labor Market Returns and the Evolution of Cognitive Skills: Theory and Evidence (2022)
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:nbr:nberwo:29135

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w29135

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().