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Cognitive Abilities and Labour Market Outcomes

  • Silke Anger
  • Guido Heineck

We 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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File URL: http://www.diw.de/documents/publikationen/73/diw_01.c.55666.de/dp655.pdf
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Paper provided by DIW Berlin, German Institute for Economic Research in its series Discussion Papers of DIW Berlin with number 655.

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Length: 18 p.
Date of creation: 2006
Date of revision:
Handle: RePEc:diw:diwwpp:dp655
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  1. Murnane, Richard J & Willett, John B & Levy, Frank, 1995. "The Growing Importance of Cognitive Skills in Wage Determination," The Review of Economics and Statistics, MIT Press, vol. 77(2), pages 251-66, May.
  2. Patrick Royston, 2004. "Multiple imputation of missing values," Stata Journal, StataCorp LP, vol. 4(3), pages 227-241, September.
  3. Derek A. Neal & William R. Johnson, 1995. "The Role of Pre-Market Factors in Black-White Wage Differences," NBER Working Papers 5124, National Bureau of Economic Research, Inc.
  4. Jeffrey S. Zax & Daniel I. Rees, 2002. "IQ, Academic Performance, Environment, and Earnings," The Review of Economics and Statistics, MIT Press, vol. 84(4), pages 600-616, November.
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