The returns to cognitive and non-cognitive abilities in Germany

Turning to the estimates for cognitive abilities, we find further differences by gender:
The coefficients for fluid intelligence are not statistically different from zero in the
regressions for females. Yet, cognitive abilities are relevant for males’ wages. The
coefficients for the symbol correspondence test imply wage benefits of about 2% for a one
standard deviation increase in the test score (Table 1, columns 3 and 4).
Panel results
One might be tempted to ask why one should use panel methods at all, since
cognitive abilities or personality traits might serve as proxies for unobservable heterogeneity.
However, this depends on the specific measures. Employing panel estimators might thus
account for remaining individual specific heterogeneity. Our results in fact show that the
FFM indicators and the ones on reciprocity are sensitive to accounting for further
unobservable heterogeneity. In particular, with the exception of a wage penalty of about 3%
for agreeableness for females, none of the FFM covariates is statistically different from zero
anymore in the HTIV regressions (Table 2, column 2). The results also change dramatically
for males inasmuch as none of the FFM covariates is statistically significant. Apart from
that, there is no effect of negative reciprocity, but a wage benefit from positive reciprocity of
about 2% for both males and females. Hence, the findings of Dohmen et al. (2009) for their
cross-section of the SOEP can be confirmed using panel data techniques, even if additional
personality indicators and cognitive skills are included.
[Table 2 about here]
The changes in the findings from OLS to panel estimates suggest that parts of
individuals’ unobservable heterogeneity are captured by FFM traits and reciprocity
indicators. This however seems not to be the case for the remaining personality trait, the
external locus of control i.e. the attitude to believe that the experienced outcomes are
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