The Production of Cognitive and Non-cognitive Human Capital in the Global Economy

A country's welfare depends on its ability to accumulate cognitive and noncognitive human capital. However, we do not fully understand what makes some countries successful at producing human capital and even struggle with measurement. e.g. international test scores are informative about the cognitive dimension but neglect the non-cognitive dimension. In this paper, we develop a multi-country, open-economy general-equilibrium framework in which countries' ability to turn resources into human capital along the cognitive and non-cognitive dimensions is revealed by the endogenous educational and occupational choices of its citizens and their subsequent performance on international exams. Our model allows us to estimate countries' underlying productivities of cognitive and non-cognitive human capital. We find that high test scores do not necessarily imply high cognitive productivities (e.g. Switzerland, Hong Kong) and that many countries with low test scores have high non-cognitive productivities (e.g. the U.S. and U.K.)