Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/170650
Authors: 
Cappellari, Lorenzo
Castelnovo, Paolo
Checchi, Daniele
Leonardi, Marco
Year of Publication: 
2016
Series/Report no.: 
Working Paper, Dipartimento di Economia e Finanza (DISCE), Università Cattolica del Sacro Cuore 53
Abstract: 
We use OECD-PIAAC data to estimate the earnings effects of both years of education and of numerical skills. Our identification strategy exploits differential exposure to educational reforms across birth cohorts and countries. We find that education has the strongest earnings effect. A one standard deviation increase in years of education raises earnings by almost 22 percentage points (corresponding to a return to education above 7 percentage points), which compares with a lower percentage points return to an equivalent increase in numerical skills. Our results suggest that the same set of unobservables drives the accumulation of both formal years of education and numeracy skills. OLS estimates underestimate returns to human capital, consistently with the idea that educational reforms favour the human capital acquisition of abler children from disadvantaged parental backgrounds. When we consider numerical skills alone education reforms cannot identify any significant effect of skills on wages, however, when we jointly consider schooling and skills as endogenous factors in a recursive structure we find a significant role for skills in determining wages.
Subjects: 
Returns to human capital
cognitive skills
educational reforms
PIAAC
JEL: 
I21
I24
I26
J24
J31
Document Type: 
Working Paper

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