Coping with change: International differences in the returns to skills

- The labor market returns to cognitive skills vary significantly across countries.
- Returns to skills are systematically larger in countries that have grown rapidly, supporting the hypothesis that human capital facilitates adaptation to change.
- Larger union density and greater public employment are associated with lower returns to skills but do not confound estimation of the skill-growth relationship.
- Returns to skills do not appear to be systematically related to skill inequality.

International data from the PIAAC survey allow estimation of comparable labor-market returns to skills for 32 countries. Returns to skills are larger in faster growing economies, consistent with the hypothesis that skills are particularly important for adaptation to economic change.