Noncognitive skills in economics: Models, measurement, and empirical evidence

•Overview on measurement, economic modeling and findings of noncognitive skills.•Interdisciplinary link to notation and methodology of psychological literature.•Emphasis on critical assumptions for cross-situational persistency of nc. skills.•Review of mapping of personality traits into economic preferences.•Practical guidance on application w.r.t. common econometric pitfalls.

There is an increasing economic literature considering personality traits as a source of individual differences in labor market productivity and other outcomes. This paper provides an overview on the role of these skills with a particular focus on measurement and estimation. Based on the relevant literature from different disciplines, common psychometric measures used to assess personality are discussed and critical assumptions for their applications are highlighted. Moreover, we report and describe ideas of recent research that aims at incorporating personality traits into economic models of decision making. Based on these foundations, the main results of the empirical literature regarding noncognitive skills are summarized. Finally, we provide a brief guide to econometric analysis with consideration of common econometric pitfalls that evolve in empirical analysis of personality traits and review possible solutions.