Eric A. Hanushek|Guido Schwerdt|Simon Wiederhold|Ludger Woessmann
Returns to skills around the world: Evidence from PIAAC
Hoover Institution|Stanford University|University of Konstanz|Ifo Institute for Economic Research|Ifo Institute for Economic Research
existing estimates labormarket returns human capital give distorted picture role skills across different economies international comparisons earnings analyses rely almost exclusively school attainment measures human capital evidence incorporating direct measures cognitive skills mostly restricted earlycareer workers united states analysis new piaac survey adult skills full lifecycle 23 countries shows focus earlycareer earnings leads underestimating lifetime returns skills one quarter average onestandarddeviation increase numeracy skills associated 18 percent wage increase among primeage workers masks considerable heterogeneity across countries eight countries including nordic countries returns 12 15 percent six 21 percent largest return 28 percent united states estimates remarkably robust different earnings skill measures additional controls various subgroups instrumentalvariable models use skill variation stemming school attainment parental education compulsoryschooling laws provide even higher estimates intriguingly returns skills systematically lower countries higher union density stricter employment protection larger publicsector shares