Cognitive and non-cognitive skills in developing countries

This dissertation examines the role that cognitive and non-cognitive skills play in developing countries along three axes: measurement of these skills, wage returns to them, and as determinants of levels of trust. The first chapter uses panel data from two cohorts of a skills training program in Mozambique to contrast two types of skill measurement: self-assessments and observational exercises. The chapter shows that self-assessments capture underlying traits, while observational exercises are better suited for program evaluations. The second chapter is based on a novel matched employer-employee data set representing the formal sector in Bangladesh and provides evidence of both the relative importance of cognitive and non-cognitive skills in this part of the labor market and the interplay between skills and hiring channels in determining wages. Results demonstrate positive returns to non-cognitive skills, varying by hiring channel. This chapter also offers suggestive evidence that employers might use hiring channels differently, depending on which skills they deem important. The third chapter makes use of the demonetization policy of November 2016 in India and a newly collected data set to causally identify the determinants of trust in a rural setting, controlling for a variety of individual characteristics, such as non-cognitive skills and cognitive ability, that could influence network formation and trust. We find that social interactions determine trust, though this result holds only among men and varies along the lines of caste membership.

Keywords: Development Economics, Labor Economics, Cognitive and non-cognitive skills.