The Effects of Cognitive and Noncognitive Abilities on Wages in Japan

Author Name YASUI Kengo (Aoyama Gakuin University) / SANO Shinpei (Chiba University) / KUME Koichi (Toyo University) / TSURU Kotaro (Faculty Fellow, RIETI)
Creation Date/NO. April 2020 20-J-024
Research Project Reform of Labor Market Institutions
Download / Links


This paper provides the first evidence in Japan on how both cognitive and non-cognitive abilities affect individual wages. Using data from "Internet Survey on Intergenerational Education and Training, and Cognitive and Non-cognitive Abilities" conducted by the Research Institute of Economy, Trade and Industry, we employ test scores from the cognitive reflection test (CRT) and literacy and numeracy scores from OECD online assessments as cognitive abilities, and Big Five, self-esteem, and locus of control as measures of non-cognitive abilities, in order to estimate the effect of cognitive and non-cognitive abilities using OLS and quantile regression. The results are as follows. We first find a robust result in a significant positive effect of extroversion and self-esteem on wages for any different sample restriction choices or estimation methods. Our estimates also suggest the positive effect of conscientiousness and emotional stability and the negative effect of agreeableness and openness to experience on wages, depending on the estimations by gender and wage quartile. Furthermore, we confirm the important role of cognitive abilities, which is particularly demonstrated in the significant positive effect of CRT, and the fact that numeracy has a greater effect than literacy on wages.