Toward an Understanding of the Returns to Cognitive Skills Across Cohorts

Judith Hellerstein, Sai Luo and Sergio S. Urzúa

No 32229, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Recent research concludes that wage returns to cognitive skills have declined in the U.S. We reassess this finding. Using decomposition methods, we document the pivotal role played by dynamic shifts in the distributions of pre-labor market cognitive skills. Our findings show these shifts explain the declining estimated returns to cognitive skills, especially for white men. We discard measurement error as a potential driver. Although often overlooked, grappling with changing pre-labor market skill distributions is necessary for capturing the evolution of labor market returns to cognitive skills. This may prove especially important in the future given continuing changes in skill development in recent youth cohorts.

JEL-codes: J24 J31 (search for similar items in EconPapers)
Date: 2024-03
New Economics Papers: this item is included in nep-inv, nep-lma, nep-ltv and nep-neu
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