This paper established that a low dimensional vector of cognitive and noncognitive skills explains a variety of labor market and behavioral outcomes. For many dimensions of social performance cognitive and noncognitive skills are equally important. Our analysis addresses the problems of measurement error, imperfect proxies, and reverse causality that plague conventional studies of cognitive and noncognitive skills that regress earnings (and other outcomes) on proxies for skills. Noncognitive skills strongly influence schooling decisions, and also affect wages given schooling decisions. Schooling, employment, work experience and choice of occupation are affected by latent noncognitive and cognitive skills. We study a variety of correlated risky behaviors such as teenage pregnancy and marriage, smoking, marijuana use, and participation in illegal activities. The same low dimensional vector of abilities that explains schooling choices, wages, employment, work experience and choice of occupation explains these behavioral outcomes.

We examine two key channels through which commodity price super-cycles affect the economy: a wealth channel, through which higher commodity prices increase domestic demand, and a cost channel, through which they induce wage increases. By exploiting regional variation in exposure to commodity price shocks and administrative firm-level data from Brazil, we empirically disentangle these transmission channels. We introduce a dynamic model with heterogeneous firms and workers to further quantify the mechanisms and evaluate welfare. A counterfactual economy in which commodity booms are purely endowment shocks experiences only 30% of the intersectoral labour reallocation between tradables and nontradables, and 40% of the within-tradable labour reallocation between domestic and exported production. Finally, the consumption-equivalent welfare gain of a commodity super-cycle is twice as large in the counterfactual economy.

This paper investigates the role of mechanical ability as a determinant of schooling decisions and labor market outcomes. Using a Roy model with multiple unobserved abilities and longitudinal data from NLSY79, we find that this ability has a positive effect on overall earnings. However, in contrast to cognitive and socioemotional abilities, mechanical ability reduces the likelihood of 4-year college attendance. The rationale for this asymmetry comes from its large estimated impact on earnings conditional on not attending a 4-year college. Our findings highlight the importance of moving beyond the one-size-fits-all discourse to offer individuals alternative educational pathways to successful careers.

This paper examines the properties of instrumental variables (IV) applied to models with essential heterogeneity, that is, models where responses to interventions are heterogeneous and agents adopt treatments (participate in programs) with at least partial knowledge of their idiosyncratic response. We analyze two-outcome and multiple-outcome models, including ordered and unordered choice models. We allow for transition-specific and general instruments. We generalize previous analyses by developing weights for treatment effects for general instruments. We develop a simple test for the presence of essential heterogeneity. We note the asymmetry of the model of essential heterogeneity: outcomes of choices are heterogeneous in a general way; choices are not. When both choices and outcomes are permitted to be symmetrically heterogeneous, the method of IV breaks down for estimating treatment parameters.

In this paper, we determine the role played by early cognitive, noncognitive, and health endowments. We identify the causal effect of education on health and health-related behaviors. We develop an empirical model of schooling choice and post-schooling outcomes, where both schooling and the outcomes determined in part by schooling are influenced by measured early family environments and latent capabilities (cognitive, noncognitive and health). We show that family background characteristics, and cognitive, noncognitive, and health endowments developed by age 10, are important determinants of labor market and health disparities at age 30. Not properly accounting for personality traits overestimates the importance of cognitive ability in determining adult health. Selection on factors determined early in life explains more than half of the observed difference by education in poor health, depression, and obesity. Education has an important causal effect in explaining differences in many adult outcomes and healthy behaviors. We uncover significant gender differences. We go beyond the current literature which typically estimates mean effects to compute distributions of treatment effects. We show how the health returns to education can vary among individuals who are similar with respect to their observed characteristics, and how a mean effect can hide gains and losses for different individuals. Our research highlights the important role played by the early years in producing health.