Labour Market Returns to Ability in Developing and Developed Countries: Comparison between Indonesia and the United States

35 Pages Posted: 19 Feb 2008

See all articles by Daniel Suryadarma

Daniel Suryadarma

Australian National University (ANU) - Arndt-Corden Department of Economics; SMERU Research Institute

Date Written: March 1, 2008

Abstract

This paper compares the labour market returns to ability in Indonesia and the United States. In Indonesia, I find that the mathematics ability has no significant effect on income, while general cognitive ability positively affects income, with higher ability rewarded at an increasing rate. However, only the highly educated can reap the benefit of higher ability, implying the existence of credentialism. In the US, meanwhile, I find that only mathematics ability is significant, and there is neither non-linear effect of ability on income nor evidence of credentialism. Comparing the results, I find that there are indeed different valuations of skills between developed and developing countries. Higher mathematics ability is more rewarded in the US, while higher cognitive skills is more rewarded in Indonesia.

Keywords: income, ability, mathematics, cognitive, Indonesia, United States

JEL Classification: I20, J31

Suggested Citation

Suryadarma, Daniel, Labour Market Returns to Ability in Developing and Developed Countries: Comparison between Indonesia and the United States (March 1, 2008). Available at SSRN: https://ssrn.com/abstract=1094482 or http://dx.doi.org/10.2139/ssrn.1094482

Daniel Suryadarma (Contact Author)

Australian National University (ANU) - Arndt-Corden Department of Economics ( email )

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