Abstract
The literature provides evidence on the positive connection between cognitive test scores and higher wages. Fewer and newer studies have explored the correlation between non-cognitive test scores and wages. However, these studies only focus on developed countries. The main objective of this study is to identify latent abilities and explore their role in the gender wage gap in a developing country: Peru. The main identification strategy relies on exploiting panel data information on test scores and arguing that time dependence across measures is due to latent abilities. We exploit two databases: the Young Lives Study and the Peruvian Skills and Labor Market Survey. The results show that when accounting for differences in actual latent abilities, socioemotional abilities account for important inter-gender differences in the endowment and returns of abilities. Moreover, inter-gender differences in latent abilities play an important role in not only wage profiles but in schooling, employment, and occupational decisions.
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Notes
Information regarding socioemotional abilities was not collected during the first round for the older cohort.
For self-esteem, the statements explored in the YL survey focused on positive and negative dimensions of pride and shame based on the Rosenberg Self-Esteem Scale that focused on dimensions of children’s living circumstances. For self-efficacy we focused on five items: “If we try hard we can improve my situation in life”; “Other people in my family make all the decisions about how we spend my time”; “I like to make plans for my future studies and work”; and “I (don’t) have choice about the work we do”. The degree of agreement was measured on a 4-point Likert scale that ranged from strong agreement to strong disagreement. We constructed two indices (one for each trait) as the average score of these items and used the standardized indices for our estimations.
We should consider that the YL sample ignores children in the top 5% of the national income distribution.
From now on, we will work with the composite measure of GRIT as the representative test for measuring socioemotional ability. We chose to work with GRIT as the literature on socioemotional abilities highlight its importance, and because Díaz et al. (2012), who also use the ENHAB, find that it plays an important role on wage equations. Nonetheless, every estimation has also been performed with the measures of the rest of personality traits and arrives at similar results.
No measure of the caregiver’s cognitive ability was available in the dataset.
We also analyzed the relation between latent abilities and wages using another measure of non-cognitive ability (self-efficacy) and obtained similar results.
The sample size is higher than in the O-B section with measured abilities because we also consider those with no information on measured abilities. We proceed in this way in order to exploit the variability in the available data as much as possible.
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Acknowledgements
We want to thank Sergio Urzúa, Omar Arias, Marcel Fafchamps, five anonymous referees, and seminar participants in the “Conference on Skills, Education and Labor Market Outcomes” at the University of Maryland, “Inequalities in Children’s Outcomes in Developing Countries Conference” at Oxford University, and the Lacea and Peruvian Economic Association for helpful comments and discussions.
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Lavado, P., Velarde, L. & Yamada, G. Cognitive and socioemotional skills and wages: the role of latent abilities on the gender wage gap in Peru. Rev Econ Household 20, 471–496 (2022). https://doi.org/10.1007/s11150-021-09556-9
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DOI: https://doi.org/10.1007/s11150-021-09556-9