RETURNS TO HUMAN CAPITAL EDUCATION ABILITY AND NONCOGNITIVE
RETURNS TO HUMAN CAPITAL –EDUCATION, ABILITY AND NON-COGNITIVE SKILLS: EVIDENCE FROM FILIPINO ADOLESCENTS Futoshi Yamauchi (World Bank)* Nazmul Chaudhury (World Bank) Akira Murata (JICA) Izumi Yamasaki (Gakushuin University) The 13 th NCS, Manila October 4 2016
OBJECTIVES Estimate returns to human capital using data on the future earnings adolescents expect if they engage in the best occupation they desire. Possible complementarities between different components of human capital (e. g. , cognitive and noncognitive). Non-cognitive skill component is a new angle. The analysis uses “Grit” (i. e. , Passion and perseverance for a long-term goal).
THE EXPECTED EARNINGS Reservation wage (RW): the minimum level of monthly earnings they will accept in their most-desirable occupation after completing schooling/training. One advantage of focusing on the future earnings for the adolescent population is we can avoid a selection problem/bias caused by their work-school choice. Note that the expected earnings are not the same as the realized earnings. The level of reservation wage indicates some part of their dynamic strategy in the labor market (e. g. , a low RW means they accept a low wage and thus work experience accumulates, instead of waiting as a job seeker).
HUMAN CAPITAL Human capital is captured by educational attainment and type/track, cognitive ability (math score), and noncognitive skills (grit score). Cognitive ability is measured by math score (a simple exam implemented in the survey) Non-cognitive skills is measured by Grit score: Passion and perseverance for a long-term goal (we had 12 questions; each question produces a score ranged 1 to 5) Risk preference (subjective) is also included. Anthropometry measures (height and weight) Morbidity Sibling/early-stage conditions
MATH TEST
GRIT
SAMPLE JICA K-12 Tracking Survey Sample: Gr 10 and 11 in pilot SHS and comparison schools Educational attainment/choice: (a) Gr 10, (b) Voc-Tech SHS Gr 11/12, (c) Post-secondary training institutions, (d) College Use those who did not work directly after Gr 10
THOSE WHO LOOK FOR PROFESSIONAL JOBS EXPECT HIGHER EARNINGS
NO GENDER DIFFERENCE IN FUTURE EARNINGS
RESERVATION WAGES BY EDUCATION LEVEL/TYPE EDUC=1 GR 10, EDUC=2 SHS GR 11/12, EDUC=3 VOC/TECH, EDUC=4 COLLEGE
NO CLEAR DIFFERENCE BEWTEENGR 10 VSSHS GR 11/12
COLLEGE STUDENTS EXPECT HIGHER EARNINGS THAN OTHERS
COLLEGE VS SHS CONTROLLING GRADES = 11/12
OCCUPATION PREFERENCE BY EDUCATION TYPE COLLEGE STUDENTS DESIRE TO GET A PROFESSIONAL JOB (OCC=1)
MATH AND GRIT BY EDUCATION TYPE COMPARISON OF MEANS Variable Obs Mean Std. Dev. Min Max --------------------------------------Gr 10 math 638 2. 291536 1. 202936 0 4 grit 638 28. 72884 5. 647979 11 48 SHS Gr 11/12 math 104 2. 317308 1. 08175 0 4 grit 104 27. 90385 5. 061791 16 39 Voc/Training Inst math 127 2. 094488 1. 211277 0 4 grit 127 27. 94488 5. 68946 11 42 College math 1344 2. 77753 1. 068914 0 4 grit 1344 28. 61607 4. 981118 12 51 Note: Including those who worked for pay directly after Gr 10
GRIT SCORE BY EDUCATION TYPE
GRIT BY MATH Obs Mean Std. Dev. Min Max -------------------------------------Math = 0 149 27. 91275 5. 964912 11 48 Math = 1 267 28. 603 5. 554216 15 42 Math = 2 424 28. 86321 5. 438256 14 43 Math = 3 905 28. 39669 5. 158397 12 44 Math = 4 468 28. 86111 4. 689496 13 51 Note: Including those who worked for pay directly after Gr 10
RESERVATION WAGE AND MATH
RESERVATION WAGE AND GRIT
RESERVATION WAGE AND RISK PREFERENCE
RESERVATION WAGE AND GRIT BY EDUCATION TYPE
ESTIMATION: RETURNS TO HUMAN CAPITAL SHS Gr 11/12 -0. 0109536 (0. 12) 0. 0271969 (0. 14) 0. 3527361 (6. 64) 0. 0739358 (4. 79) 0. 0081544 (2. 45) 0. 2126109 (0. 46) Voc/Training Inst 1. 120724 (3. 23) College 0. 4922453 (2. 72) Math 0. 0740209 (4. 88) Grit 0. 0143054 (2. 53) * SHS Gr 11/12 -0. 0077521 (0. 51) * Voc/Training Inst -0. 0385555 (2. 96) * College -0. 0048092 (0. 83) Risktake 0. 0804818 0. 0839597 (1. 45) (1. 52) Female -0. 0340542 -0. 0357376 (0. 72) (0. 77) Included: height (cm), weight (kg), age started school, sibling size, birth order, attend daycare/nursery, attend kindergarden, smoking, chronic illness, disability, ES barangay urban/rural dummy, batch/school year dummies, school dummies, birth-place province dummies. Numbers in parentheses are absolute t values using robust standard errors with school clusters Sample: grit in (15, 40), those who did not work for pay directly after Gr 10. Omitted case: Gr 10.
SUMMARY In general, reservation wage and grit are positively related (see the regression results), especially among college students. However, higher grit tends to significantly lower the future RW among tech/voc track students: SHS Gr 11/12 + Voc/training Inst. (*) Tech-voc track students who have non-cognitive traits based on passion/perseverance for long-term goals are likely to accept a wider range of conditions at the initial job, as part of their dynamic strategy in the labor market. (*) Lower RW means they accept a lower wage to start the first job and thus work experience and skills likely accumulate, instead of being a job seeker meantime. This step can be an important stepping stone toward more rewarding jobs in the future. The above effect is not observed among college students. High grit students set a higher RW (i. e. , more picky on the first job). (*) Controlling for heterogeneity in returns by grit, the expected returns to voc/training inst are significantly positive (in fact, they become higher than returns to college).
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