Cognitive Abilities and Labour Market Outcomes
AbstractWe contribute to the literature on the relationship between cognitive abilities and labour market outcomes providing first evidence for Germany. In particular, cross-sectional data from the German Socio-Economic Panel (SOEP) are used, which include two measures of cognitive ability, one test of fluid mechanics (speed test) and another test of crystallised pragmatics (word fluency test). We find a positive relationship between cognitive abilities and economic activity, as workers with high ability test scores are less likely to be unemployed. In addition, results from Mincer-type OLS and 2SLS regressions suggest that mechanics abilities are correlated with wages in a significantly positive way for West German workers, even when educational attainment is controlled for, whereas pragmatics of cognition do not affect earnings significantly. However, we also find that ability and education are inseparable determinants of earnings, which confirms findings of recent studies for other countries.
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Bibliographic InfoPaper provided by DIW Berlin, German Institute for Economic Research in its series Discussion Papers of DIW Berlin with number 655.
Length: 18 p.
Date of creation: 2006
Date of revision:
Cognitive ability; earnings regressions; returns to education; ability bias; unemployment probability;
Find related papers by JEL classification:
- J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
- J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
- I21 - Health, Education, and Welfare - - Education - - - Analysis of Education
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-01-13 (All new papers)
- NEP-CBE-2007-01-13 (Cognitive & Behavioural Economics)
- NEP-HRM-2007-01-13 (Human Capital & Human Resource Management)
- NEP-LAB-2007-01-13 (Labour Economics)
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