The Rising Return to Noncognitive Skill

This paper uses administrative data from Sweden to document trends in the labor market returns to skills. Between 1992 and 2013, the economic return to noncognitive skill—a psychologist-assessed measure of teamwork and leadership skill—roughly doubled. The return to cognitive skill was relatively stable and decreased modestly during the 2000s, however. Among men with similar levels of education, the return to noncognitive skill is higher than the return to cognitive skill. The increasing return to noncognitive skill is driven by changes at the top of the wage distribution and by sorting into higher-paying occupations. (JEL I26, J24, J31)