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Cognitive and Socioemotional Skills and Wages: The role of latent abilities on the gender wage gap in Peru

Listed author(s):
  • Pablo Lavado

    (Universidad del Pacífico)

  • Luciana Velarde

    (Universidad del Pacífico)

  • Gustavo Yamada

    (Universidad del Pacífico)

Literature provides evidence on the positive connection between cognitive test scores and higher wages. Fewer and newer papers have explored the correlation between socioemotional test scores and wages. However, attention is focused on developed countries. Test scores suffer two limitations. First, they can be considered outcomes of the schooling level and latent (unobserved) cognitive and socioemotional abilities. Second, they are potentially measured with error. The main objective of this paper is to identify latent abilities and explore their role in the gender wage gap in a developing country: Peru. The main identification strategy relies on exploring panel data information on test scores and arguing that time dependence across measures is due to latent abilities. We exploit two databases Young Lives Study and the Peruvian Skills and Labor Market Survey (ENHAB). Young Lives has panel data information on test scores and ENHAB has cross-sectional information on test scores and wages. Results show that when accounting for differences in actual latent ability socioemotional abilities account for important inter-gender differences in the endowment and returns of abilities. Moreover, inter-gender differences in latent abilities play an important role not only in wage profiles, but in schooling, employment and occupation decisions.

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Paper provided by Peruvian Economic Association in its series Working Papers with number 2014-16.

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Date of creation: Aug 2014
Handle: RePEc:apc:wpaper:2014-016
Contact details of provider: Web page: http://perueconomics.org/

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  1. Flavio Cunha & James J. Heckman & Susanne M. Schennach, 2010. "Estimating the Technology of Cognitive and Noncognitive Skill Formation," Econometrica, Econometric Society, vol. 78(3), pages 883-931, 05.
  2. Joseph A Ritter & Lowell J Taylor, 2011. "Racial Disparity in Unemployment," The Review of Economics and Statistics, MIT Press, vol. 93(1), pages 30-42, February.
  3. Helmers, Christian & Patnam, Manasa, 2011. "The formation and evolution of childhood skill acquisition: Evidence from India," Journal of Development Economics, Elsevier, vol. 95(2), pages 252-266, July.
  4. Richard C. Edwards, 1976. "Individual Traits and Organizational Incentives: What Makes a "Good" Worker?," Journal of Human Resources, University of Wisconsin Press, vol. 11(1), pages 51-68.
  5. Wayne A. Grove & Andrew Hussey & Michael Jetter, 2011. "The Gender Pay Gap Beyond Human Capital: Heterogeneity in Noncognitive Skills and in Labor Market Tastes," Journal of Human Resources, University of Wisconsin Press, vol. 46(4), pages 827-874.
  6. Nicole M. Fortin, 2008. "The Gender Wage Gap among Young Adults in the United States: The Importance of Money versus People," Journal of Human Resources, University of Wisconsin Press, vol. 43(4).
  7. Neal, Derek A & Johnson, William R, 1996. "The Role of Premarket Factors in Black-White Wage Differences," Journal of Political Economy, University of Chicago Press, vol. 104(5), pages 869-895, October.
  8. David Bravo Urrutia & Claudia Sanhueza & sergio Urzúa, 2007. "Ability, Schooling Choices And Gender Labor Market Discrimination: Evidence For Chile," Working Papers wp265, University of Chile, Department of Economics.
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