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Résumé (français)

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Résumé (anglais)

Using the Youth in Transition Survey (YITS-A) we estimate a Roy model with a two dimensional latent factor structure to consider how both cognitive and non-cognitive skills influence endogenous schooling decisions and subsequent labour market outcomes in Canada. Our estimates indicate that non-cognitive skills play a role in determining income at age 25 that is on par with that of cognitive skills. Our analysis demonstrates that it is crucial to account for the dynamics in decision making since this demonstrates that the effect of cognitive skills on adult incomes arises by one increasing the likelihood of obtaining further education. Conditioning on the choice to complete a university degree, cognitive skills are found to play no additional role in determining earnings at age 25. In contrast, non-cognitive skills not only indirectly influence adult income through the channel of educational choice, but they are directly rewarded in the labour market. Last, evidence from policy simulations suggest that equal attention should be given to policies that cultivate different dimensions of non-cognitive skills as those that focus solely on cognitive skills.