IDEAS home Printed from https://ideas.repec.org/a/aea/aecrev/v97y2007i2p31-47.html
   My bibliography  Save this article

The Technology of Skill Formation

Author

Listed:
  • James Heckman
  • Flavio Cunha

Abstract

his paper presents formal models of child development that capture the essence of recent findings from the empirical literature on child development. The goal is to provide theoretical frameworks for interpreting the evidence from a vast empirical literature, for guiding the next generation of empirical studies and for formulating policy. We start from the premise that skill formation is a life-cycle process. It starts in the womb and goes on throughout most of the adult life. Families and firms have a role in this process that is at least as important as the role of schools. There are multiple skills and multiple abilities that are important for adult success. Abilities are both inherited and created, and the traditional debate of nature versus nurture is outdated and scientifically obsolete. The technology of skill formation has two additional important characteristics. The first one is that IQ and behavior are more plastic at early ages than at later ages. Furthermore, behavior is much more malleable than IQ as individuals age. The second is that human capital investments are complementary over time. Early investments increase the productivity of later investments. Early investments are not productive if they are not followed up by later investments. The returns to investing early in the life cycle are high. Remediation of inadequate early investments is difficult and very costly
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • James Heckman & Flavio Cunha, 2007. "The Technology of Skill Formation," American Economic Review, American Economic Association, vol. 97(2), pages 31-47, May.
  • Handle: RePEc:aea:aecrev:v:97:y:2007:i:2:p:31-47
    Note: DOI: 10.1257/aer.97.2.31
    as

    Download full text from publisher

    File URL: http://www.aeaweb.org/articles.php?doi=10.1257/aer.97.2.31
    Download Restriction: Access to full text is restricted to AEA members and institutional subscribers.
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Hansen, Karsten T. & Heckman, James J. & Mullen, K.J.Kathleen J., 2004. "The effect of schooling and ability on achievement test scores," Journal of Econometrics, Elsevier, vol. 121(1-2), pages 39-98.
    2. Stephen V. Cameron & James J. Heckman, 1998. "Life Cycle Schooling and Dynamic Selection Bias: Models and Evidence for Five Cohorts of American Males," Journal of Political Economy, University of Chicago Press, vol. 106(2), pages 262-333, April.
    3. Currie, Janet & Thomas, Duncan, 1995. "Does Head Start Make a Difference?," American Economic Review, American Economic Association, vol. 85(3), pages 341-364, June.
    4. 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.
    5. Flavio Cunha & James J. HECKMAN, 2009. "Investing in our Young People," Rivista Internazionale di Scienze Sociali, Vita e Pensiero, Pubblicazioni dell'Universita' Cattolica del Sacro Cuore, vol. 117(3), pages 387-418.
    6. Stephen V. Cameron & Christopher Taber, 2004. "Estimation of Educational Borrowing Constraints Using Returns to Schooling," Journal of Political Economy, University of Chicago Press, vol. 112(1), pages 132-182, February.
    7. Pedro Carneiro & James J. Heckman, 2002. "The Evidence on Credit Constraints in Post--secondary Schooling," Economic Journal, Royal Economic Society, vol. 112(482), pages 705-734, October.
    8. 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.
    9. Eliana Garces & Duncan Thomas & Janet Currie, 2002. "Longer-Term Effects of Head Start," American Economic Review, American Economic Association, vol. 92(4), pages 999-1012, September.
    10. James Heckman & Lance Lochner & Christopher Taber, 1998. "Explaining Rising Wage Inequality: Explanations With A Dynamic General Equilibrium Model of Labor Earnings With Heterogeneous Agents," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 1(1), pages 1-58, January.
    11. Stephen V. Cameron & James J. Heckman, 1998. "Life Cycle Schooling and Dynamic Selection Bias: Models and Evidence for Five Cohorts," NBER Working Papers 6385, National Bureau of Economic Research, Inc.
    12. Carneiro, Pedro & Heckman, James J & Masterov, Dimitriy V, 2005. "Labor Market Discrimination and Racial Differences in Premarket Factors," Journal of Law and Economics, University of Chicago Press, vol. 48(1), pages 1-39, April.
    13. Gary S. Becker & Casey B. Mulligan, 1997. "The Endogenous Determination of Time Preference," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 112(3), pages 729-758.
    14. Gary S. Becker & Nigel Tomes, 1994. "Human Capital and the Rise and Fall of Families," NBER Chapters, in: Human Capital: A Theoretical and Empirical Analysis with Special Reference to Education, Third Edition, pages 257-298, National Bureau of Economic Research, Inc.
    15. Roland Benabou, 2002. "Tax and Education Policy in a Heterogeneous-Agent Economy: What Levels of Redistribution Maximize Growth and Efficiency?," Econometrica, Econometric Society, vol. 70(2), pages 481-517, March.
    16. Bhargava, Alok, 2012. "Food, Economics, and Health," OUP Catalogue, Oxford University Press, number 9780199663910.
    17. Jacob A. Mincer, 1974. "Introduction to "Schooling, Experience, and Earnings"," NBER Chapters, in: Schooling, Experience, and Earnings, pages 1-4, National Bureau of Economic Research, Inc.
    18. Melissa Osborne & Herbert Gintis & Samuel Bowles, 2001. "The Determinants of Earnings: A Behavioral Approach," Journal of Economic Literature, American Economic Association, vol. 39(4), pages 1137-1176, December.
    19. Laitner, John, 1992. "Random earnings differences, lifetime liquidity constraints, and altruistic intergenerational transfers," Journal of Economic Theory, Elsevier, vol. 58(2), pages 135-170, December.
    20. Richard C. Edwards, 1976. "Individual Traits and Organizational Incentives: What Makes a "Good" Worker?," Journal of Human Resources, University of Wisconsin Press, vol. 11(1), pages 51-68.
    21. John M. Barron & Mark C. Berger & Dan A. Black, 2006. "Selective Counteroffers," Journal of Labor Economics, University of Chicago Press, vol. 24(3), pages 385-410, July.
    22. Janet Currie & Duncan Thomas, 2000. "School Quality and the Longer-Term Effects of Head Start," Journal of Human Resources, University of Wisconsin Press, vol. 35(4), pages 755-774.
    23. Costas Meghir & Mårten Palme, 2001. "The effect of a social experiment in education," IFS Working Papers W01/11, Institute for Fiscal Studies.
    24. 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.
    25. Flavio Cunha & James J. Heckman, 2008. "Formulating, Identifying and Estimating the Technology of Cognitive and Noncognitive Skill Formation," Journal of Human Resources, University of Wisconsin Press, vol. 43(4).
    26. Yoram Ben-Porath, 1967. "The Production of Human Capital and the Life Cycle of Earnings," Journal of Political Economy, University of Chicago Press, vol. 75(4), pages 352-352.
    27. Knudsen, Eric I. & Heckman, James J. & Cameron, Judy L. & Shonkoff, Jack P., 2006. "Economic, Neurobiological and Behavioral Perspectives on Building America's Future Workforce," IZA Discussion Papers 2190, Institute of Labor Economics (IZA).
    28. Carneiro, Pedro & Heckman, James J., 2003. "Human Capital Policy," IZA Discussion Papers 821, Institute of Labor Economics (IZA).
    29. Aiyagari, S. Rao & Greenwood, Jeremy & Seshadri, Ananth, 2002. "Efficient Investment in Children," Journal of Economic Theory, Elsevier, vol. 102(2), pages 290-321, February.
    30. Roland Benabou, 2000. "Unequal Societies: Income Distribution and the Social Contract," American Economic Review, American Economic Association, vol. 90(1), pages 96-129, March.
    31. Heckman, James J, 1995. "Lessons from the Bell Curve," Journal of Political Economy, University of Chicago Press, vol. 103(5), pages 1091-1120, October.
    32. Elizabeth Caucutt & Lance Lochner, 2004. "Early and Late Human Capital Investments, Credit Constraints, and the Family," 2004 Meeting Papers 129, Society for Economic Dynamics.
    33. 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.
    34. Robert J. LaLonde, 1995. "The Promise of Public Sector-Sponsored Training Programs," Journal of Economic Perspectives, American Economic Association, vol. 9(2), pages 149-168, Spring.
    35. Jacob A. Mincer, 1974. "Schooling and Earnings," NBER Chapters, in: Schooling, Experience, and Earnings, pages 41-63, National Bureau of Economic Research, Inc.
    36. Jacob A. Mincer, 1974. "Schooling, Experience, and Earnings," NBER Books, National Bureau of Economic Research, Inc, number minc74-1.
    37. Griliches, Zvi, 1977. "Estimating the Returns to Schooling: Some Econometric Problems," Econometrica, Econometric Society, vol. 45(1), pages 1-22, January.
    38. Case, Anne & Fertig, Angela & Paxson, Christina, 2005. "The lasting impact of childhood health and circumstance," Journal of Health Economics, Elsevier, vol. 24(2), pages 365-389, March.
    39. Murnane, Richard J & Willett, John B & Levy, Frank, 1995. "The Growing Importance of Cognitive Skills in Wage Determination," The Review of Economics and Statistics, MIT Press, vol. 77(2), pages 251-266, May.
    40. Stephen V. Cameron & James J. Heckman, 2001. "The Dynamics of Educational Attainment for Black, Hispanic, and White Males," Journal of Political Economy, University of Chicago Press, vol. 109(3), pages 455-499, June.
    41. Gordon B. Dahl & Lance Lochner, 2005. "The Impact of Family Income on Child Achievement," NBER Working Papers 11279, National Bureau of Economic Research, Inc.
    42. Blau, David & Currie, Janet, 2006. "Pre-School, Day Care, and After-School Care: Who's Minding the Kids?," Handbook of the Economics of Education, in: Erik Hanushek & F. Welch (ed.), Handbook of the Economics of Education, edition 1, volume 2, chapter 20, pages 1163-1278, Elsevier.
    43. Bruce A. Weinberg, 2001. "An Incentive Model of the Effect of Parental Income on Children," Journal of Political Economy, University of Chicago Press, vol. 109(2), pages 266-280, April.
    44. Yona Rubinstein & James J. Heckman, 2001. "The Importance of Noncognitive Skills: Lessons from the GED Testing Program," American Economic Review, American Economic Association, vol. 91(2), pages 145-149, May.
    Full references (including those not matched with items on IDEAS)

    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. 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.
    2. Flavio Cunha & James J. Heckman, 2009. "The Economics and Psychology of Inequality and Human DEvelopment," Journal of the European Economic Association, MIT Press, vol. 7(2-3), pages 320-364, 04-05.
    3. James J. Heckman, 2008. "Schools, Skills, And Synapses," Economic Inquiry, Western Economic Association International, vol. 46(3), pages 289-324, July.
    4. Thiel, Hendrik & Thomsen, Stephan L., 2013. "Noncognitive skills in economics: Models, measurement, and empirical evidence," Research in Economics, Elsevier, vol. 67(2), pages 189-214.
    5. Heckman, James J., 2007. "The Economics, Technology and Neuroscience of Human Capability Formation," IZA Discussion Papers 2875, Institute of Labor Economics (IZA).
    6. 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.
    7. Ross Levine & Yona Rubinstein, 2013. "Liberty for More: Finance and Educational Opportunities," NBER Working Papers 19380, National Bureau of Economic Research, Inc.
    8. Carneiro, Pedro & Heckman, James J., 2003. "Human Capital Policy," IZA Discussion Papers 821, Institute of Labor Economics (IZA).
    9. Flavio Cunha & James J. Heckman, 2009. "Human Capital Formation in Childhood and Adolescence," ifo DICE Report, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 7(4), pages 22-28, 01.
    10. 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.
    11. Felicia Ionescu, 2009. "The Federal Student Loan Program: Quantitative Implications for College Enrollment and Default Rates," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 12(1), pages 205-231, January.
    12. Norbert Schady, 2006. "Early Childhood Development in Latin America and the Caribbean," Economía Journal, The Latin American and Caribbean Economic Association - LACEA, vol. 0(Spring 20), pages 185-225, January.
    13. Gianluca Violante & Giovanni Gallipoli & Costas Meghir, 2005. "Education Decisions, Equilibrium Policies and Wages Dispersion," 2005 Meeting Papers 522, Society for Economic Dynamics.
    14. 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.
    15. Akabayashi, Hideo & Ruberg, Tim & Shikishima, Chizuru & Yamashita, Jun, 2023. "Education-oriented and care-oriented preschools: Implications on child development," Labour Economics, Elsevier, vol. 84(C).
    16. Francesconi, Marco & Heckman, James J, 2015. "Symposium on Child Development and Parental Investment: Introduction," Economics Discussion Papers 16868, University of Essex, Department of Economics.
    17. Anna Christina D'Addio, 2007. "Intergenerational Transmission of Disadvantage: Mobility or Immobility Across Generations?," OECD Social, Employment and Migration Working Papers 52, OECD Publishing.
    18. Pierre Lefebvre & Philip Merrigan & Matthieu Verstraete, 2008. "The Effects of School Quality and Family Functioning on Youth Math Scores: a Canadian Longitudinal Analysis," Cahiers de recherche 0822, CIRPEE.
    19. Richard J. Murnane, 2013. "U.S. High School Graduation Rates: Patterns and Explanations," Journal of Economic Literature, American Economic Association, vol. 51(2), pages 370-422, June.
    20. James J. Heckman & Dimitriy V. Masterov, 2007. "The Productivity Argument for Investing in Young Children ," Review of Agricultural Economics, Agricultural and Applied Economics Association, vol. 29(3), pages 446-493.

    More about this item

    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

    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:aea:aecrev:v:97:y:2007:i:2:p:31-47. 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: Michael P. Albert (email available below). General contact details of provider: https://edirc.repec.org/data/aeaaaea.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.