IDEAS home Printed from https://ideas.repec.org/p/bri/uobdis/22-755.html
   My bibliography  Save this paper

Policies for Early Childhood Skills Formation: Accounting for Parental Choices and Noncognitive Skills

Author

Listed:
  • Iacopo Morchio

Abstract

What are the returns in terms of children's skills development to child allowance policies? Answering this question requires a theory of the tradeoffs faced by households, as well as a realistic technology of skills formation. I build a model of parental choices which embeds the technology of cognitive and noncognitive skills formation estimated by Cunha et al. (2010), featuring risky investment in children, time use trade-offs, idiosyncratic income risk and borrowing constraints. Accounting for noncognitive skills implies higher effectiveness of parental investments, and therefore higher policy returns than previously estimated in the literature.

Suggested Citation

  • Iacopo Morchio, 2022. "Policies for Early Childhood Skills Formation: Accounting for Parental Choices and Noncognitive Skills," Bristol Economics Discussion Papers 22/755, School of Economics, University of Bristol, UK.
    • Handle: RePEc:bri:uobdis:22/755
    as

    Download full text from publisher

    File URL: http://www.bristol.ac.uk/efm/media/workingpapers/working_papers/pdffiles/dp22755.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Jérôme Adda & Christian Dustmann & Katrien Stevens, 2017. "The Career Costs of Children," Journal of Political Economy, University of Chicago Press, vol. 125(2), pages 293-337.
    2. James Heckman & Flavio Cunha, 2007. "The Technology of Skill Formation," American Economic Review, American Economic Association, vol. 97(2), pages 31-47, May.
    3. Lance J. Lochner & Alexander Monge-Naranjo, 2011. "The Nature of Credit Constraints and Human Capital," American Economic Review, American Economic Association, vol. 101(6), pages 2487-2529, October.
    4. Lance Lochner & Alexander Monge-Naranjo, 2012. "Credit Constraints in Education," Annual Review of Economics, Annual Reviews, vol. 4(1), pages 225-256, July.
    5. Ylenia Brilli, 2022. "Mother’s Time Allocation, Childcare, and Child Cognitive Development," Journal of Human Capital, University of Chicago Press, vol. 16(2), pages 233-272.
    6. Garey Ramey & Valerie A. Ramey, 2010. "The Rug Rat Race," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 41(1 (Spring), pages 129-199.
    7. Raquel Bernal & Michael P. Keane, 2011. "Child Care Choices and Children's Cognitive Achievement: The Case of Single Mothers," Journal of Labor Economics, University of Chicago Press, vol. 29(3), pages 459-512.
    8. Daniela Del Boca & Christopher Flinn & Matthew Wiswall, 2014. "Household Choices and Child Development," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 81(1), pages 137-185.
    9. Altonji, Joseph G & Segal, Lewis M, 1996. "Small-Sample Bias in GMM Estimation of Covariance Structures," Journal of Business & Economic Statistics, American Statistical Association, vol. 14(3), pages 353-366, July.
    10. Brant Abbott & Giovanni Gallipoli & Costas Meghir & Giovanni L. Violante, 2019. "Education Policy and Intergenerational Transfers in Equilibrium," Journal of Political Economy, University of Chicago Press, vol. 127(6), pages 2569-2624.
    11. McFadden, Daniel, 1989. "A Method of Simulated Moments for Estimation of Discrete Response Models without Numerical Integration," Econometrica, Econometric Society, vol. 57(5), pages 995-1026, September.
    12. Petra E. Todd & Kenneth I. Wolpin, 2007. "The Production of Cognitive Achievement in Children: Home, School, and Racial Test Score Gaps," Journal of Human Capital, University of Chicago Press, vol. 1(1), pages 91-136.
    13. Elizabeth M. Caucutt & Lance Lochner, 2020. "Early and Late Human Capital Investments, Borrowing Constraints, and the Family," Journal of Political Economy, University of Chicago Press, vol. 128(3), pages 1065-1147.
    14. Diego Restuccia & Carlos Urrutia, 2004. "Intergenerational Persistence of Earnings: The Role of Early and College Education," American Economic Review, American Economic Association, vol. 94(5), pages 1354-1378, December.
    15. James J. Heckman & Stefano Mosso, 2014. "The Economics of Human Development and Social Mobility," Annual Review of Economics, Annual Reviews, vol. 6(1), pages 689-733, August.
    16. Eric A. Hanushek & Ludger Woessmann, 2008. "The Role of Cognitive Skills in Economic Development," Journal of Economic Literature, American Economic Association, vol. 46(3), pages 607-668, September.
    17. Flavio Cunha & James J. Heckman & Susanne M. Schennach, 2010. "Estimating the Technology of Cognitive and Noncognitive Skill Formation," Econometrica, Econometric Society, vol. 78(3), pages 883-931, May.
    18. Bernal, Raquel & Keane, Michael P., 2010. "Quasi-structural estimation of a model of childcare choices and child cognitive ability production," Journal of Econometrics, Elsevier, vol. 156(1), pages 164-189, May.
    19. Blundell, Richard & Macurdy, Thomas, 1999. "Labor supply: A review of alternative approaches," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 27, pages 1559-1695, Elsevier.
    20. Lasse Eika & Magne Mogstad & Basit Zafar, 2019. "Educational Assortative Mating and Household Income Inequality," Journal of Political Economy, University of Chicago Press, vol. 127(6), pages 2795-2835.
    21. James J. Heckman & Jora Stixrud & Sergio Urzua, 2006. "The Effects of Cognitive and Noncognitive Abilities on Labor Market Outcomes and Social Behavior," Journal of Labor Economics, University of Chicago Press, vol. 24(3), pages 411-482, July.
    22. Anger, Silke & Heineck, Guido, 2010. "Do Smart Parents Raise Smart Children? The Intergenerational Transmission of Cognitive Abilities," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 23, pages 1105-1132.
    23. Duffie, Darrell & Singleton, Kenneth J, 1993. "Simulated Moments Estimation of Markov Models of Asset Prices," Econometrica, Econometric Society, vol. 61(4), pages 929-952, July.
    24. S. Rao Aiyagari, 1994. "Uninsured Idiosyncratic Risk and Aggregate Saving," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 109(3), pages 659-684.
    25. Minchul Yum, 2023. "Parental Time Investment And Intergenerational Mobility," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 64(1), pages 187-223, February.
    26. Mark Huggett & Gustavo Ventura & Amir Yaron, 2011. "Sources of Lifetime Inequality," American Economic Review, American Economic Association, vol. 101(7), pages 2923-2954, December.
    27. Cunha, Flavio & Heckman, James J. & Lochner, Lance, 2006. "Interpreting the Evidence on Life Cycle Skill Formation," Handbook of the Economics of Education, in: Erik Hanushek & F. Welch (ed.), Handbook of the Economics of Education, edition 1, volume 1, chapter 12, pages 697-812, Elsevier.
    28. Elizabeth M. Caucutt & Lance Lochner & Joseph Mullins & Youngmin Park, 2020. "Child Skill Production: Accounting for Parental and Market-Based Time and Goods Investments," NBER Working Papers 27838, National Bureau of Economic Research, Inc.
    29. Victoria Osuna & Jose-Victor Rios-Rull, 2003. "Implementing the 35 Hour Workweek by Means of Overtime Taxation," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 6(1), pages 179-206, January.
    30. Youderian, Xiaoyan, 2019. "Human Capital Production With Parental Time Investment In Early Childhood," Macroeconomic Dynamics, Cambridge University Press, vol. 23(4), pages 1504-1527, June.
    31. Mehmet Soytas & Limor Golan & George-Levi Gayle, 2014. "What Accounts for the Racial Gap in Time Allocation and Intergenerational Transmission of Human Capital?," 2014 Meeting Papers 83, Society for Economic Dynamics.
    32. Diego Daruich, 2018. "The Macroeconomic Consequences of Early Childhood Development Policies," Working Papers 2018-010, Human Capital and Economic Opportunity Working Group.
    33. Heckman, James J. & Moon, Seong Hyeok & Pinto, Rodrigo & Savelyev, Peter A. & Yavitz, Adam, 2010. "The rate of return to the HighScope Perry Preschool Program," Journal of Public Economics, Elsevier, vol. 94(1-2), pages 114-128, February.
    34. Brant Abbott, 2022. "Incomplete Markets and Parental Investments in Children," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 44, pages 104-124, April.
    35. Huggett, Mark, 1993. "The risk-free rate in heterogeneous-agent incomplete-insurance economies," Journal of Economic Dynamics and Control, Elsevier, vol. 17(5-6), pages 953-969.
    36. Michael P. Keane, 2011. "Labor Supply and Taxes: A Survey," Journal of Economic Literature, American Economic Association, vol. 49(4), pages 961-1075, December.
    37. Pedro Carneiro & Italo López García & Kjell G. Salvanes & Emma Tominey, 2021. "Intergenerational Mobility and the Timing of Parental Income," Journal of Political Economy, University of Chicago Press, vol. 129(3), pages 757-788.
    38. Jonathan Guryan & Erik Hurst & Melissa Kearney, 2008. "Parental Education and Parental Time with Children," Journal of Economic Perspectives, American Economic Association, vol. 22(3), pages 23-46, Summer.
    39. Pakes, Ariel & Pollard, David, 1989. "Simulation and the Asymptotics of Optimization Estimators," Econometrica, Econometric Society, vol. 57(5), pages 1027-1057, September.
    40. Todd Schoellman, 2016. "Early Childhood Human Capital and Development," American Economic Journal: Macroeconomics, American Economic Association, vol. 8(3), pages 145-174, July.
    41. Helmers, Christian & Patnam, Manasa, 2011. "The formation and evolution of childhood skill acquisition: Evidence from India," Journal of Development Economics, Elsevier, vol. 95(2), pages 252-266, July.
    42. Becker, Gary S & Tomes, Nigel, 1979. "An Equilibrium Theory of the Distribution of Income and Intergenerational Mobility," Journal of Political Economy, University of Chicago Press, vol. 87(6), pages 1153-1189, December.
    43. Mark Aguiar & Erik Hurst & Loukas Karabarbounis, 2013. "Time Use during the Great Recession," American Economic Review, American Economic Association, vol. 103(5), pages 1664-1696, August.
    44. Sang Yoon (Tim) Lee & Ananth Seshadri, 2019. "On the Intergenerational Transmission of Economic Status," Journal of Political Economy, University of Chicago Press, vol. 127(2), pages 855-921.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Nicola Fuchs-Schündeln & Dirk Krueger & André Kurmann & Etienne Lalé & Alexander Ludwig & Irina Popova, 2023. "The Fiscal and Welfare Effects of Policy Responses to the Covid-19 School Closures," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 71(1), pages 35-98, March.
    2. Minchul Yum, 2023. "Parental Time Investment And Intergenerational Mobility," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 64(1), pages 187-223, February.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Minchul Yum, 2023. "Parental Time Investment And Intergenerational Mobility," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 64(1), pages 187-223, February.
    2. Elizabeth M. Caucutt & Lance Lochner, 2020. "Early and Late Human Capital Investments, Borrowing Constraints, and the Family," Journal of Political Economy, University of Chicago Press, vol. 128(3), pages 1065-1147.
    3. Francesconi, Marco & Heckman, James J, 2015. "Symposium on Child Development and Parental Investment: Introduction," Economics Discussion Papers 16868, University of Essex, Department of Economics.
    4. Uta Bolt & Eric French & Jamie Hentall Maccuish & Cormac O’Dea, 2018. "Intergenerational Altruism and Transfers of Time and Money: A Life-cycle Perspective," Working Papers wp379, University of Michigan, Michigan Retirement Research Center.
    5. James J. Heckman & Stefano Mosso, 2014. "The Economics of Human Development and Social Mobility," Annual Review of Economics, Annual Reviews, vol. 6(1), pages 689-733, August.
    6. Uta Bolt & Eric French & Jamie Hentall-MacCuish & Cormac O'Dea, 2021. "The intergenerational elasticity of earnings: exploring the mechanisms," IFS Working Papers W21/07, Institute for Fiscal Studies.
    7. Youngsoo Jang & Minchul Yum, 2020. "Aggregate and Intergenerational Implications of School Closures: A Quantitative Assessment," CRC TR 224 Discussion Paper Series crctr224_2020_234v2, University of Bonn and University of Mannheim, Germany.
    8. Elizabeth M. Caucutt & Lance Lochner & Youngmin Park, 2017. "Correlation, Consumption, Confusion, or Constraints: Why Do Poor Children Perform so Poorly?," Scandinavian Journal of Economics, Wiley Blackwell, vol. 119(1), pages 102-147, January.
    9. Nicola Fuchs-Schündeln & Dirk Krueger & André Kurmann & Etienne Lalé & Alexander Ludwig & Irina Popova, 2023. "The Fiscal and Welfare Effects of Policy Responses to the Covid-19 School Closures," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 71(1), pages 35-98, March.
    10. Nicola Fuchs-Schünde & Dirk Krueger & Alexander Ludwig & Irina Popova, 2022. "The Long-Term Distributional and Welfare Effects of Covid-19 School Closures," The Economic Journal, Royal Economic Society, vol. 132(645), pages 1647-1683.
    11. Minchul Yum, 2015. "Parental Time Investment and Human Capital Formation: A Quantitative Analysis of Intergenerational Mobility," 2015 Meeting Papers 996, Society for Economic Dynamics.
    12. Braxton, John Carter & Chikhale, Nisha & Herkenhoff, Kyle & Phillips, Gordon, 2024. "Intergenerational Mobility and Credit," IZA Discussion Papers 16826, Institute of Labor Economics (IZA).
    13. Diego Daruich & Julian Kozlowski, 2020. "Explaining Intergenerational Mobility: The Role of Fertility and Family Transfers," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 36, pages 220-245, April.
    14. Doepke, M. & Tertilt, M., 2016. "Families in Macroeconomics," Handbook of Macroeconomics, in: J. B. Taylor & Harald Uhlig (ed.), Handbook of Macroeconomics, edition 1, volume 2, chapter 0, pages 1789-1891, Elsevier.
    15. Emily Moschini, 2019. "Child Care Subsidies with One- and Two-Parent Families," 2019 Meeting Papers 42, Society for Economic Dynamics.
    16. Jorge Luis García & James J. Heckman, 2022. "Parenting Promotes Social Mobility Within and Across Generations," NBER Working Papers 30610, National Bureau of Economic Research, Inc.
    17. Rong Hai & James Heckman, 2017. "Inequality in Human Capital and Endogenous Credit Constraints," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 25, pages 4-36, April.
    18. Elizabeth M. Caucutt & Lance Lochner & Joseph Mullins & Youngmin Park, 2020. "Child Skill Production: Accounting for Parental and Market-Based Time and Goods Investments," NBER Working Papers 27838, National Bureau of Economic Research, Inc.
    19. Sneha Elango & Jorge Luis García & James J. Heckman & Andrés Hojman, 2015. "Early Childhood Education," NBER Chapters, in: Economics of Means-Tested Transfer Programs in the United States, Volume 2, pages 235-297, National Bureau of Economic Research, Inc.
    20. Rong Hai & James Heckman, 2017. "Inequality in Human Capital and Endogenous Credit Constraints," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 25, pages 4-36, April.

    More about this item

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bri:uobdis:22/755. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Vicky Jackson (email available below). General contact details of provider: https://edirc.repec.org/data/sebriuk.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.