Working Paper: NBER ID: w22442
Authors: Francesco Agostinelli; Matthew Wiswall
Abstract: In this paper we study the process of children’s skill formation. Using a dynamic latent factor structure, we show how measurement restrictions on observed measures aid the identification of skill technology features. We then use our identification results to develop and estimate the joint dynamic process of latent investment and skill development, allowing for static and dynamic complementarities in skill production between parental investments and children’s skills. Using data for the United States, we estimate that parental investments are particularly productive in producing cognitive skills during early childhood (ages 5-6). Moreover, we find that the marginal productivity of investments in this period is substantially higher for children with lower existing skills, suggesting the optimal targeting of interventions to disadvantaged young children.
Keywords: Child Skill Formation; Parental Investments; Cognitive Skills; Dynamic Complementarities
JEL Codes: C38; J13
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Low existing skills (J24) | Higher marginal productivity of parental investments (D29) |
| Low-skill children (J79) | Higher elasticity of skill production from investments (J24) |
| Parental investments (J13) | Development of children's cognitive skills (I25) |
| Income transfers to families at ages 5-6 (J13) | Enhancement of children's skills and educational outcomes (I24) |
| Parental investments (J13) | Children's skills (dynamic complementarities) (J24) |