Most research on the economic payoffs of skills has used
individuals’ level of schooling attained—typically years or
level of education or training received—as a key proxy for
skills. Such research has consistently found that individual
returns to schooling are positive and that returns tend to be
higher in low- and middle-income countries than in higherincome
countries. However, years in school is only one
proxy for skills—are these returns still observed using other
measures as proxies? This study uses data from the STEP
Skills Measurement Survey to examine the extent to which
there is an independent association between cognitive and
noncognitive skills and earnings in low- and middle-income
countries. The study uses measures of reading proficiency
and complexity of on-the-job computer tasks to proxy cognitive
skills, and personality and behavioral measures to proxy
noncognitive skills. The results demonstrate that even when
controlling for schooling and background factors, these
skills pay off in the labor market. This is particularly the case
for the measures of cognitive skills, while noncognitive skills
show some significant, but small, effects on earnings. The
findings also suggest that there is significant heterogeneity
across countries in how skills are valued in the labor market.