The Effects of Cognitive and Noncognitive Abilities on Labor Market

William Johnson and James P. Ziliak and two anonymous referees for helpful comments. We also thank Jeff Grogger, Bruce Meyer and Derek Neal for very helpful comments that led to revisions and clarifications. Supplementary materials are on our website jenni.uchicago.edu/noncog. We thank Federico Temerlin and Tae Ho Whang for very competent research assistance. This paper establishes that a low dimensional vector of cognitive and noncognitive skills explains a variety of labor market and behavioral outcomes. For many dimensions of social performance cognitive and noncognitive skills are equally important. Our analysis addresses the problems of measurement error, imperfect proxies, and reverse causality that plague conventional studies of cognitive and noncognitive skills that regress earnings (and other outcomes) on proxies for skills. Noncognitive skills strongly influence schooling decisions, and also affect wages given schooling de-cisions. Schooling, employment, work experience and choice of occupation are affected by latent noncognitive and cognitive skills. We study a variety of correlated risky behaviors such as teenage pregnancy and marriage, smoking, marijuana use, and participation in illegal activities. The same low dimensional vector of abilities that explains schooling choices, wages, employment, work expe