Noncognitive Skills in Economics: Models, Measurement, and Empirical Evidence

Posted: 13 Dec 2009

See all articles by Stephan L. Thomsen

Stephan L. Thomsen

Leibniz Universität Hannover - Institute of Economics; IZA Institute of Labor Economics; ZEW – Leibniz Centre for European Economic Research - Labour Markets, Human Resources and Social Policy Department

Hendrik Thiel

ZEW – Leibniz Centre for European Economic Research

Date Written: 2009

Abstract

Measuring unobserved individual ability is a core challenge of the analysis of questions related to human capital development. For that purpose, concepts from psychology, predominantly measures of IQ have become established means in empirical economics. However, many issues of individual di fferences and their consequences still remain unexplained. Recently, the consideration of personality traits in the economic literature has started and substantially contributes to narrow the gap of explained and unexplained aspects of human capital. With regard to human capital theory, economists usually refer to noncognitive skills in this context. The paper at hand provides an overview on the growing but inuential literature in the field. The composition and impact of noncognitive skills on certain outcomes are usually less familiar to economists and, moreover, in comparison to cognition, these skills exhibit a larger scope for interventions. Therefore, the text should serve as a short introductory guide to a wide audience of readers in economics. This audience includes nonspecialist readers and experts, too. Based on the contemporary literature, central questions and fi ndings regarding measurement, theoretical modeling, and the empirical estimates are summarized. The obtained results shed light on the relation between parental investments, skill formation in general, and later outcomes. From this review, some features highly relevant for the development of human capital skills could be identi fied: Early investments are the most crucial inputs into skill formation in general and should be followed by later investments. As a consequence, early neglect usually cannot be compensated in the aftermath since returns to education diminish. Even more importantly, the impact of acquired noncognitive skills on various outcomes throughout the life course is more eminent than assumed until recently. Not only schooling and later earnings, but also important social and health-related outcomes are strongly a ffected.

Keywords: noncognitive skills, personality, human capital formation, psychometric measures

JEL Classification: I20, I28, J12, J24, J31

Suggested Citation

Thomsen, Stephan Lothar and Thiel, Hendrik, Noncognitive Skills in Economics: Models, Measurement, and Empirical Evidence (2009). ZEW - Centre for European Economic Research Discussion Paper No. 09-076, Available at SSRN: https://ssrn.com/abstract=1520548

Stephan Lothar Thomsen (Contact Author)

Leibniz Universität Hannover - Institute of Economics ( email )

United States

IZA Institute of Labor Economics ( email )

P.O. Box 7240
Bonn, D-53072
Germany

ZEW – Leibniz Centre for European Economic Research - Labour Markets, Human Resources and Social Policy Department ( email )

P.O.Box 10 34 43
D-68034
Germany

Hendrik Thiel

ZEW – Leibniz Centre for European Economic Research ( email )

P.O. Box 10 34 43
L 7,1
D-68034 Mannheim, 68034
Germany

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