Who benefits more from the digital economy: (Non-)Cognitive ability and the labor income premium

Abstract

This study examines how cognitive and non-cognitive abilities affect changes in individual labor income resulting from digitalization in China. Based on data from the China Family Panel Studies, a representative national household survey conducted in 2018 with over 3700 observations, our findings indicate that the digital economy generally increases labor incomes. However, the impact of the digital economy on labor income is related to individuals' ability. The digital economy has a significant positive effect on labor income returns on cognitive ability, while the effect on the non-cognitive premium is insignificant. Our study contributes to understanding the new human capital theory and provides insights for advancing shared prosperity in the digital era.