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.