The Production of Cognitive and Non-Cognitive Human Capital in the Global Economy

66 Pages Posted: 23 Apr 2018 Last revised: 5 Jul 2021

See all articles by Chong Xiang

Chong Xiang

Purdue University - Krannert School of Management

Stephen R. Yeaple

Pennsylvania State University - College of the Liberal Arts - Department of Economic; National Bureau of Economic Research (NBER)

Date Written: April 2018

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. Our 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.

Suggested Citation

Xiang, Chong and Yeaple, Stephen R., The Production of Cognitive and Non-Cognitive Human Capital in the Global Economy (April 2018). NBER Working Paper No. w24524, Available at SSRN: https://ssrn.com/abstract=3167039

Chong Xiang (Contact Author)

Purdue University - Krannert School of Management ( email )

1310 Krannert Building
West Lafayette, IN 47907-1310
United States

Stephen R. Yeaple

Pennsylvania State University - College of the Liberal Arts - Department of Economic ( email )

524 Kern Graduate Building
University Park, PA 16802-3306
United States
8148655452 (Phone)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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