Employers also highlight the demand for a range of skills. A review of 28 studies reveals remarkable consistency across the world in the skills demanded by employers. Although employers value all skill sets, there is a greater demand for socio‐emotional and higher‐order cognitive skills – the capacity to deal with complex information processing – than for basic cognitive or technical skills. These results are robust across economy size and level of development, sector, export‐ orientation, and occupations (Cunningham and Villaseñor 2014).

While most of the work correlating skills and labor market outcomes is based on US or European data, new data from developing countries permit the exploration of whether the skills important for success in developing country labor markets are the same as those identified in US and European labor markets. Both the OECD’s PIAAC<sup>4</sup> and the World Bank’s STEP<sup>5</sup> initiatives have begun to survey adults in countries as diverse as Bolivia, Colombia, Ghana, Sri Lanka, the Ukraine and Vietnam. These surveys collect data from adults on cognitive skills ‐ primarily literacy and skills used on the job – and non‐cognitive skills. The data analysis shows that both sets of skills affect wages and employment patterns. While these studies give the first insights into how these skills interact with labor markets, they suffer from a range of econometric issues that limit the robustness of their conclusions.

An early survey undertaken in Peru (ENHAB 2010) provides a richer set of variable that allow us to employ methodologies to overcome some of the econometric issues and perhaps present more robust results. Using these data, Diaz, Arias, and Vera‐Tudela (2012) explore the impact of cognitive and non‐cognitive skills on wages. The paper finds that an additional standard deviation in the overall non‐cognitive skill measure increases earnings by 9 percent, similar in magnitude to the effects of individual cognitive skills. Specifically, emotional stability<sup>6</sup> and perseverance of effort are associated with 5 and 8 percent higher earnings respectively; while agreeableness is associated with 8 percent lower earnings. Lavado, Velarde, and Yamada (2014) complement the ENHAB with longitudinal data on national test scores and find that differences in non‐cognitive skills explain gender gaps in returns to abilities, schooling, employment and occupation.

The case of Peru is interesting not only from a data, but also from a policy, point of view. The country is engaged in a debate about which skills are the key to labor market success, including a discussion about the role of non‐cognitive skills. Since the beginning of the millennium, Peru has experienced impressive growth rates, rising from 2 percent in 2001 to more than 9 percent in 2008, returning to over 6 percent by 2013; largely due to a boom in export products in newly developed markets.<sup>7</sup> Drawing from evidence from the US and Europe, the Peruvian Ministry of Education designed and is pilot‐testing a non‐cognitive skills development program. Furthermore, since November 2013, the Ministry of Labor has been implementing a series of free short workshops that

> 4 http://www.oecd.org/site/piaac/

> 5 http://siteresources.worldbank.org/EXTHDOFFICE/Resources/5485726‐1281723119684/TEP_Skills_Measurement_Brochure_Jan _2012.pdf

> 6 The concept “emotional stability” captures the depth of reaction to emotions, particularly negative emotions. Those who have more moderated reactions are rated as having higher emotional stability. Those who are more reactive are rated as being less emotionally stable, or the (unfortunate) parlance of “neuroticism.”

> 7 World Development Indicators, accessed on June 13, 2014.

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