Working Paper: NBER ID: w24524
Authors: Chong Xiang; Stephen Yeaple
Abstract: A country’s welfare depends on its ability to accumulate cognitive and non-cognitive human capital. In this paper, we model the productions of cognitive and non-cognitive human capital in general equilibrium. We use revealed comparative advantage to infer countries’ non-cognitive and cognitive productivities without a direct measure for the non-cognitive dimension. Our model also delivers analytical expressions for how non- cognitive and cognitive productivities can be aggregated into a single human-capital quality index, or HCQI, and how HCQI relates to output per worker. \nOur model allows us to obtain the values of non-cognitive and cognitive productivities and HCQI, using publically available data for a sample of mostly high-income countries. We find that: 1. many countries with low test scores have high non-cognitive productivities; 2. the hard-to-measure non-cognitive human capital is important for HCQI, and HCQI is important for output per worker; 3. the trade-o¤ between cognitive- and non-cognitive productivities can be visualized and analyzed using an iso-HCQI curve: e.g. uneven cognitive and non-cognitive productivities tend to lower HCQI; 4. this trade-o¤ can be quantified, and has policy implications: e.g. excessive attention to test scores may decrease aggregate output; 5. international trade matters, theoretically, for HCQI, because the gains from trade help to compensate a country for uneven productivity across human capital types: e.g. the iso-HCQI curve would have a very different shape under free trade.
Keywords: cognitive human capital; noncognitive human capital; human capital quality index; international trade
JEL Codes: F16; F63; F66; I21; I25; I26; O15; O43; O47
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| low cognitive scores (D91) | high noncognitive productivities (D29) |
| noncognitive human capital (J24) | output per worker (E23) |
| cognitive and noncognitive productivities (D29) | HCQI (I11) |
| increased emphasis on cognitive scores (D91) | decrease in overall output (E23) |
| trade (F19) | HCQI (I11) |