Returns to Skills Around the World: Evidence from PIAAC

By Eric A. Hanushek, Guido Schwerdt, Simon Wiederhold, Ludger Woessmann. Social Science Research Network, 2014

781 citations recorded by the source corpus.

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.

Subfields: Economics and Econometrics, Sociology and Political Science

View Paper: https://www.semanticscholar.org/paper/ca77c2f74f681e34c0c3838c96cf4f3839e66932

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Citations in the corpus

The economic case for education† (2016, methodology): “See Hanushek et al. (2015) for details.”
Mathematics Education in Sub-Saharan Africa (2016, background): “However, as shown by Saito (2011) outcomes at the primary and lower secondary levels are mixed making it difficult to draw firm conclusions.”
The Intergenerational Transmission of Cognitive and Noncognitive Abilities (2010, neutral): “Hanushek et al. (2015) report that the returns to skills in Sweden are the lowest among OECD countries.”
Coping with Change: International Differences in the Returns to Skills (2017, neutral): “…in our model, but leaves all other qualitative results unchanged.12 Third, results are robust to using alternative periods over which to measure prior 12 Hanushek et al. (2015) also showed that returns to skills are not systematically related to product-market regulations and minimum wages.”