Non-cognitive skills and labor market outcomes : evidences from Thailand

Abstract

This study consists of both theoretical and empirical parts. In the theoretical part, the definitions of non-cognitive skills and similar proposed concepts are revealed as individual psychological characteristics that signal the skills or abilities to provide individual or improve group “effort,” and these characteristics can be observed through one’s personality, traits, behaviours, habits, and attitudes. A review of existing effort-inclusive economic models and psychological theories of motivation confirmed that effort involves both pre-determined and situational factors. Based on Atkinson’s theory of achievement motivation and Bandura’s theory of self-efficacy, an economic concept of individual motivation and effort was developed. The level of an individual’s effort depends on the strength of his or her motivation and both effort and motivation are determined by motive, the existing characters of the individual required to approach or avoid certain behaviours; self-efficacy, the belief that a person can perform required actions; outcome expectation, the belief that actions will lead to desired outcomes; and incentive value, the attractiveness of the foreseen outcomes. In the empirical part of the present study, earning differences in the Thai labour market due to a worker’s psychological character of generalized self-efficacy were investigated. Self-efficacy is defined as a person’s belief about his or her ability to organize and execute courses of action necessary to achieve a goal. Based on the Thai Mental Health Survey, the influence of self-efficacy on individual earnings was estimated and compared to that of traditional human capital. The analysis of four different model specifications confirmed the endogenous nature of self-efficacy. The impact of self-efficacy on individual earnings was statistically significant in the full sample and in almost all sub-samples. Its impact on earnings was independent from other demographic variables and unrelated to year of schooling or work experience. The contribution of self-efficacy to the earnings of males was slightly higher than that of females. The relative values of self-efficacy compared with year of schooling and work experience were higher in the private sector than in the government sector, and they were different across occupations. This study also makes brief policy recommendations to improve self-efficacy and introduces new paradigms of human development, namely human capability and the technology of skill formation.