OECD Education Working Papers

ISSN :
1993-9019 (online)
DOI :
10.1787/19939019
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This series is designed to make available to a wider readership selected studies drawing on the work of the OECD Directorate for Education. Authorship is usually collective, but principal writers are named. The papers are generally available only in their original language (English or French) with a short summary available in the other.
 

Returns to Skills Around the World

Evidence from PIAAC You or your institution have access to this content

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Author(s):
Eric A Hanushek1, Guido Schwerdt2, Simon Wiederhold3, Ludger Woessmann3
Author Affiliations
  • 1: Hoover Institution, Stanford University, United States

  • 2: University of Siegen, Germany

  • 3: Ifo Institute for Economic Research,University of Munich, Germany

Publication Date
17 Dec 2013
Bibliographic information
No.:
101
Pages
44
DOI
10.1787/5k3tsjqmvtq2-en

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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:
labour markets, international comparisons, cognitive skills, education
JEL Classification:
  • F31: International Economics / International Finance / Foreign Exchange
  • I20: Health, Education, and Welfare / Education and Research Institutions / General