MULTIDIMENSIONAL MEASURE OF HUMAN CAPITAL AND EARNINGS IN UKRAINE: IMPLICATIONS FOR NATIONAL POLICY ADVICE AND HUMAN RESOURCE MANAGEMENT
DOI:
https://doi.org/10.37659/2663-5070-2019-2-69-81Keywords:
human capital, non-cognitive skills, labor market return, Ukraine, human resource management.Abstract
For increasing effectiveness of organizational human resource management as well as for the national policy advice, it is important to assess how human capital factors, other than school attainment, influence individual earning returns, and to compare return to such factors across countries. However, the research of this area is not complete due to lack of data. As a result, there is limited cross-country understanding about how different labor markets reward extended human capital capabilities. This paper contributes to the existing research by studying the link between extended human capital factor and labor market return in Ukraine. It demonstrates the strong effect of development of emotional skills in childhood and the individual’s income as an adult. It also demonstrates that External Locus of Control strongly negatively affects wages. Furthermore, evidence is provided that Undergraduate School quality and individual health also affect wages. The paper contributes to the growing literature on importance of non-cognitive skills in labor market return.
References
Almlund, M., Duckworth, A., Heckman, J., & Kautz, T. (2011). Personality psychology and economics. Working paper No. 16822. National Bureau of Economic Research, Cambridge, MA.
Anger, S. and Heineck, G. (2010). Cognitive abilities and earnings-first evidence for Germany. Applied Economics Letters, Vol. 17, No.7, pp. 699-702.
Barth, E., Davis, J., & Freeman, R. (2016). Augmenting the human capital earning equation with measures of where people work. Working Paper No. 22512. National Bureau of Economic Research, Cambridge, MA.
Becker, G. (1964). Human Capital. National Bureau of Economic Research, New York, NY.
Black, S., Devereux, P., & Salvanes, K. (2007). From the cradle to the labor market? The effect of birth weights on adult outcomes. The Quarterly Journal of Economics, Vol. 122, pp. 409-439.
Bleakley, H. (2010). Health, human capital and development. Annual Review of Economics, Vol. 2, pp. 283-310.
Borghans, L., Duckworth, A., Heckman, J., & ter Weel, B. (2008). The Economics and psychology of personality traits. Journal of Human Resources, Vol. 43, No.4, pp. 972-1059.
Bowles, S., Gintis, H., & Osborne, M. (2001). The determinants of earnings: a behavioral approach. Journal of Economic Literature, Vol. 39, No.4, pp. 1137-1176.
Braakmann, N. (2009). The role of psychological traits for the gender gap in full-time employment and wages: evidence from Germany. SOEP papers on Multidisciplinary Panel Data Research, No. 162.
Buchmann, C. (2002). Measuring family background in international studies of education: Conceptual issues and methodological challenges. In A. Porter & A. Gamoran (Eds.), Methodological Advances in Cross-National Surveys of Educational Achievement (pp. 150-197), Washington, DC: National Academy Press.
Carneiro, P., & Heckman, J. (2003). Human capital policy. In J.J. Heckman, A. B. Krueger, B. and M. Friedman (Eds.), Inequality in America: What Role for Human Capital Policies? Cambridge, MA: MIT Press.
Chetty, R., Friendman, J., Hilger, N., Saez, E., Schanzenbach, D., & Yagan, D. (2011). How does your kindergarten classroom affect your earnings? Evidence from project STAR. Quarterly Journal of Economics Vol. 126, No. 4, pp. 1593-1660.
Cobb-Clark, D., & Schurer, B. (2011). The stability of big five personality traits. IZA Discussion Paper Series. Paper No. 5943.
Cobb-Clark, Deborah, Marco Caliendo & Arne Uhlendorff. (2015). Locus of control and job search strategies. Review of Economics and Statistics, 97, no. 1, pp. 88-103.
Cobb-Clark, Deborah. (2015). Locus of control and the labor market. IZA Journal of Labor Economics.
Cohen, D., & Soto, M. (2007). Growth and human capital: Good data, good results. Journal of Economic Growth, 12(1), 51-76.
Costa, P., & McCrae, R. (1992). Four ways five factors are basic. Personality and Individual Difference, 13(6), 653-665.
Cunha, F., & Heckman, J. (2007). The technology of skill formation. American Economic Review, 97(2), 31-47.
Cunha, F., & Heckman, J. (2008). Formulating, identifying and estimating the technology of cognitive and noncognitive skills formation. The Journal of Human Resources, 43(4), 738-782.
Cunha, F., & Heckman, J. (2010). Investing in our young people. Discussion Paper Series. IZA No 5050.
Cutler, D., & Leras-Muney, A. (2010). Understanding differences in health behaviors by education. Journal of Health Economics, 29, pp. 1-28.
Dahl, R. E. (2004). Adolescent brain development: A period of vulnerabilities and opportunities. In Annals of the New York Academy of Sciences, Ed. Ronald. E. Dahl and Linda P. Spear, 1-22. New York: New York Academy of Sciences.
Denissen, J., Bleidorn, W., Hennecke, M., et al. (2018). Uncovering the power of personality to shape income. Psychological Science, 29 (1), 3-13.
Denissen, J., Bleidorn, W., Hennecke, M., et al. (2018). Uncovering the power of personality to shape income. Psychological Science, 29 (1). Supplemental Material. Retrieved from: http://journals.sagepub.com/doi/
suppl/10.1177/0956797617724435/suppl_file/DenissenRevSupplementalMaterial.pdf on Feb 4, 2018.
Drago, F. (2008). Self-Esteem and Earnings. IZA Discussion Paper, 3577.
Fehr, E., & Gachter, S. (2000). Fairness and retaliation: The economics of reciprocity. Journal of Economic Perspectives, 14(3), 159-181.
Fletcher, J. (2012). The effects of personality traits on adult labor market outcomes: Evidence from siblings. IZA Discussion paper series. IZA DP No. 6391. February 2012.
Flossmann, A., Piatek, R., & Wichert, L. (2007). Going beyond returns to education: The role of noncognitive skills on wages in Germany. Paper presented at the European Meeting of the Econometric Society, Budapest, August 2007.
Goldin, C. (2016). Human Capital. In: Diebolt, C., & Haupert, M. (Eds). Handbook of cliomentrics. Springer, Berlin, Heidelberg, pp. 55-86.
Gottschalk, P. (2005). Can work alter welfare recipients’ beliefs? Journal of Policy Analysis and Management, 24(3), 485-498.
Hanushek, E. (1997). Assessing the effects of school resources on student performance: An update. Educational Evaluation and Policy Analysis, 19(2), 141-164.
Hanushek, E. A., & Kimko, D. D. (2000). Schooling labor force quality and the growth of nations. The American Economic Review, 90(5), 1184-1208.
Hanushek, E. A., & Woessmann, L. (2008). The role of cognitive skills in economic development. Journal of Economic Literature, 46(3), 607-668.
Hanushek, E. A., & Woessmann, L. (2012). Schooling, educational achievement and Latin American growth puzzle. Journal of Development Economics, 99(2), 497-512.
Hanushek, E., Schwerdt, G., Wiederhold, Simon, & Woessmann, L. (2015). Returns to skills around the world: Evidence from PIAAC. European Economic Review, 7, 103-130.
Hanushek, E., Ruhose, J., & Woessmann, L. (2017a). Economic gains from educational reforms by US States. Journal of Human Capital, 11(4), 447-486.
Hanushek, E., Schwerdt, G., Widerhold, S., & Woessmann, L. (2017b). Coping with change: International differences in return to skills. Economic Letters, 153, 15-19.
Hanushek, E. (2017c). For long-term economic development, only skills matter. IZA World of Labor 2017: 343. doi: 10.15185/izawol.343.
Heckman, J. (2000). Policies to foster human capital. Research in Economics, 54, 3-56.
Heckman, J. (2007). Economics, technology and neuroscience of human capability formation. PNAS 2007 August, 104 (33), 13250-13255. Retrieved from http://www.pnas.org/content/104/33/13250 on Jan 27, 2018.
Heckman, J., & Masterov, D. (2007). The productivity argument for investing in young children. Review of Agricultural Economics.
Heckman, J., Stixrud, J., & Urzua, S. (2006). The effect of cognitive and noncognitive abilities on labor market outcomes and social behavior. NBER Working Paper 12006.
Heckman, J., & Kautz, T. (2012). Hard evidence on soft skills. Labor Economics 19 (4), 451-464. Adam Smith Lecture.
Heineck, G., & Anger, S. (2008). The returns to cognitive abilities and personality traits in Germany. DIW Berlin German Institute for Economic Research. Discussion paper 836.
Hogan, J., & Holland, B. (2003). Using theory to evaluate personality and job-performance Relations: A socioanalytic perspective. Journal of Applied Psychology, 88(1), 100-112.
Hopkins, K., & Bracht, G. (1975). Ten-year stability of verbal and nonverbal IQ scores. American Educational Research Journal, 12(4), 469-477.
Ittner, C. D. (2008). Does measuring intangibles for management purposes improve performance? A review of the evidence. Accounting, Organizations, and Society, 38, pp. 261-272.
John, O. (2000). The big five personality test.
Judge, T., & Hurst, C. (2007). Capitalizing on one’s advantages: role of core self-evaluations. Journal of Applied Psychology, 92(5), 1212-1227.
Judge, T., Livingston, B., & Hurst, C. (2012). Do nice guys – and gals – really finish last? The joint effects of sex and agreeableness on income. Journal of Personality and Social Psychology, 102.
Kautz, T., Heckman, J., Diris, R., ter Weel, B., & Borghans, L. (2015). Fostering and measuring skills: Improving cognitive and non-cognitive skills to promote lifetime success. OECD.
Keller, T. (2010). Self-confidence and earnings inequalities: A test on Hungarian data. Czech Sociological Review, 46(3), 401-425.
Kovaleva, A. (2012). Construction and validation of a short scale for the assessment of locus of control. Dissertation. GESIS-Schriftenreihe. Leibniz-Institut fur Sozialwissenschaften. June 2012.
Krassel, K., & Sorensen, K. (2015). Childhood and early labor market life – Cognitive and non-cognitive skills and their return to labor market outcomes. KORA, The Danish Institute for Local and regional Government Research. June 12, 2015.
Krueger, A. B., & Lindahl, M. (2001). Education for growth: Why and for whom? Journal of Economic Literature, 39(4), 1101-1136.
Lindovist, E., & Vestman, R. (2011). The labor market returns to cognitive and noncognitive ability: Evidence from the Swedish enlistment. American Economic Journal: Applied Economics, 3, 101-128.
Linz, S., & Semykina, A. (2005). Gender differences in personality and earnings: Evidence from Russia. William Davidson Institute Working Paper Number 791. April 2005.
Lundberg. S. (2017). Noncognitive skills and human capital. NBER. Retrieved from: http://www.nber.org/chapters/c13701 on Jan 29, 2018.
Montenegro, C. E., & Patrinos, H. A. (2014). Comparable estimates of returns to schooling around the world. Policy Research Working Paper 7020. World Bank, Washington, DC.
Mueller, G., & Plug, E. (2006). Estimating the effect of personality on male and female earnings. Industrial and Labor Relations Review, 60(1), 3-22.
Nandi, A., & Nicoletti, C. (2014). Explaining personality pay gaps in the UK. Applied Economics, 46 (26), 3131-3150. DOI: 10.1080/00036846.2014.922670.
Nyhus, E., & Pons, E. (2005). The effects of personality on earnings. Journal of Economic Psychology, 26, 363-384.
Osborne-Groves, M. (2005). How important is your personality? Labor market return to personality for women in the US and UK. Journal of Economic Psychology, 26(6), 827-841.
Pritchett, L. (2006). Does learning to add up add up? The returns to schooling in aggregate data. In: Hanushek, Welch, Finis (Eds.), Handbook of the Economics of Education. North Holland, Amsterdam, pp. 635-695.
Psacharopoulos, G., & Patrinos, H. (2004). Returns to investment in education: further update. Education Economics, 12(2), 11-134.
Rivera, B., & Currais, L., (2004). Public health capital and productivity in the Spanish regions: A dynamic panel data model, World Development, 32, 871-885.
Roberts, B., Kuncel, N., Shiner, R., Caspi, A., & Goldberg, L. (2007). The power of personality: The comparative validity of personality traits, socioeconomic status, and cognitive ability for predicting important life outcomes. Perspectives on Psychological Science, 2(4), 313-345.
Rotter, J. (1966). Generalized expectancies for internal versus external control of reinforcement. Psychological Monographs, vol. 80; reprinted in Applications of a Social Learning Theory of Personality, Rotter et al. (eds.) 1972 (New York: Holt, Reinhart and Winston, Inc), pp. 260-295.
Schweinhart, L. J., Montie, J., Xiang, Z., Barnett, S., Belfield, C., & Nores, M. (2005). Lifetime effects: The High/Scope Perry Preschool study through age 40. Ypsilanti, MI: High/Scope Press.
Schultz, T. (1971). Investment in human capital. New York: NY: The Free Press.
Semykina, A., & Linz, S. J. (2007). Gender differences in personality and earnings: Evidence from Russia. Journal of Economic Psychology, 28(3), 387-410.
Smith, W., Ikoma, S., & Baker, D. (2016). Education, health and labor force supply: Broadening human capital for national development in Malawi. Cogent Education, Vol. 3 (1), pp. 1-14.
Thiel, H., & Thomsen, S. (2011). Noncognitive skills in economics: Models, measurement and empirical evidence. ZEW Discussion Paper No. 09-076. Center for European Economic Research.
Vinikainen, J., Kokko, K., Pulkkinen, L., et al. (2010). Personality and labor market income: Evidence from longitudinal data. Labor Economics, 24, 201-220. doi:10.1111/j.1467-9914.2010.00477.x.
Weil, D. (2007). Accounting for the effect of health on economic growth. Quarterly Journal of Economics 122, pp. 1265-1306.
