The rising return to non-cognitive skill

We examine the changes in the rewards to cognitive and non-cognitive skill dur-ing the time period 1992-2013. Using unique administrative data for Sweden, we document a secular increase in the returns to non-cognitive skill. This increase is particularly pronounced in the private sector, at the upper-end of the wage dis-tribution, and relative to the evolution of the return to cognitive skill. Sorting across occupations responded to changes in the returns to skills. Workers with an abundance of non-cognitive skill were increasingly sorted into abstract and non-routine occupations, for example. Such occupations also saw greater increases in the relative return to non-cognitive skill. This suggests that the optimal skill mixes of jobs have changed over time, that there is sorting on comparative advantage, and that demand-side factors are primarily driving the evolution of the return to non-cognitive skill. Consistent with this, we also show that hikes in offshoring and IT-investments increase the relative reward to non-cognitive skill and the relative intensity of non-cognitive skill usage.