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Toward an Understanding of the Returns to Cognitive Skills Across Cohorts

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  • Judith K. Hellerstein
  • Sai Luo
  • Sergio S. Urzúa

Abstract

Recent research concludes that wage returns to cognitive skills have declined in the U.S. We reassess this finding. Using decomposition methods, we document the pivotal role played by dynamic shifts in the distributions of pre-labor market cognitive skills. Our findings show these shifts explain the declining estimated returns to cognitive skills, especially for white men. We discard measurement error as a potential driver. Although often overlooked, grappling with changing pre-labor market skill distributions is necessary for capturing the evolution of labor market returns to cognitive skills. This may prove especially important in the future given continuing changes in skill development in recent youth cohorts.

Suggested Citation

  • Judith K. Hellerstein & Sai Luo & Sergio S. Urzúa, 2024. "Toward an Understanding of the Returns to Cognitive Skills Across Cohorts," NBER Working Papers 32229, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:32229
    Note: LS PE
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    Cited by:

    1. Ludger Woessmann, 2024. "Skills and Earnings: A Multidimensional Perspective on Human Capital," CESifo Working Paper Series 11428, CESifo.

    More about this item

    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

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