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Cognitive and Non-Cognitive Skills, Hiring Channels, and Wages in Bangladesh

Author

Listed:
  • Hilger, Anne

    () (Paris School of Economics)

  • Nordman, Christophe Jalil

    () (IRD, DIAL, Paris-Dauphine)

  • Sarr, Leopold

    () (World Bank)

Abstract

This paper uses a novel matched employer-employee data set representing the formal sector in Bangladesh to provide descriptive evidence of both the relative importance of cognitive and non-cognitive skills in this part of the labor market and the interplay between skills and hiring channels in determining wages. While cognitive skills (literacy, a learning outcome) affect wages only by enabling workers to use formal hiring channels, they have no additional wage return. Non-cognitive skills, on the other hand, do not affect hiring channels, but they do enjoy a positive wage return. This wage return differs by hiring channel: those hired through formal channels benefit from higher returns to openness to experience, but lower returns to conscientiousness and hostile attribution bias. Those hired through networks enjoy higher wages for higher levels of emotional stability, but they are also punished for higher hostile attribution bias. This is in line with different occupational levels being hired predominantly through one channel or the other. We provide suggestive evidence that employers might use hiring channels differently, depending on what skill they deem important: employers valuing communication skills, a skill that could arguably be observed during selection interviews, are associated with a larger within-firm wage gap between formal and network hires, while the importance of teamwork, a skill that is more difficult to observe at the hiring stage, is associated with a smaller wage gap.

Suggested Citation

  • Hilger, Anne & Nordman, Christophe Jalil & Sarr, Leopold, 2018. "Cognitive and Non-Cognitive Skills, Hiring Channels, and Wages in Bangladesh," IZA Discussion Papers 11578, Institute for the Study of Labor (IZA).
  • Handle: RePEc:iza:izadps:dp11578
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    References listed on IDEAS

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    More about this item

    Keywords

    cognitive skills; personality traits; networks; matched worker-firm data; Bangladesh;

    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
    • J71 - Labor and Demographic Economics - - Labor Discrimination - - - Hiring and Firing
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development

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