Beyond smart and sociable: Rethinking the role of abilities on occupational choices

This paper explores the role of multiple dimensions of ability on schooling decisions, occupational choices and wages.  In particular, the document concentrates on studying the effect of vocational ability, a dimension that has received little attention by economists when analyzing schooling choices and labor market outcomes.  This ability is related with mechanical, psychomotor abilities and manual dexterity. I find that vocational ability has positive returns as all other dimensions. But in contrast to standard measures, it is related with low levels of education and the choice of blue-collar occupations.

The objective of the paper is then to understand what are the implications of having high vocational ability and low levels of standard ability (measured as cognitive and nocognitive) on wages via schooling and occupational decisions. In order to do so, I estimate an augmented Roy model of self-selection with factor structure that takes into account that both schooling and occupational status are endogenous in an income equation. The model uses observed measures of ability, i.e., tests scores, to estimate the distribution of unobserved abilities. In my approach I classify occupations according to the degree of complexity of manual requirements. Using data from the Onet I match tasks with occupations and classify them into manual and abstract categories.

Using the National Longitudinal Survey of Youth (NLSY79), I show that the effect of vocational ability is not homogeneous across individuals. I show that vocational ability favors the choice of manual over abstract occupations for all individuals but especially for individuals with high schooling. For some individuals the selection is optimal and responds to comparative advantage of vocational ability on manual occupations. To the extent that alternative choices would imply lower expected salaries. While, for other individuals the selection is suboptimal in the sense they could be better off by getting a type of education that allows them to get jobs in manual-high schooling occupations.