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Cognitive skills, strategic sophistication, and life outcomes

Author

Listed:
  • Fe, Eduardo

    (University of Manchester)

  • Gill, David

    (Purdue University)

  • Prowse, Victoria

    (Purdue University)

Abstract

We investigate how childhood cognitive skills affect strategic sophistication and adult outcomes. In particular, we emphasize the importance of childhood theory-of-mind as a cognitive skill. We collected experimental data from more than seven hundred children in a variety of strategic interactions. First, we find that theory-of-mind ability and cognitive ability both predict level-k behavior. Second, older children respond to information about the cognitive ability of their opponent, which provides support for the emergence of a sophisticated strategic theory-of-mind. Third, theory-of-mind and age strongly predict whether children respond to intentions in a gift-exchange game, while cognitive ability has no influence, suggesting that different measures of cognitive skill correspond to different cognitive processes in strategic situations that involve understanding intentions. Using the ALSPAC birth-cohort study, we find that childhood theory-of-mind and cognitive ability are both associated with enhanced adult social skills, higher educational participation, better educational attainment, and lower fertility in young adulthood. Finally, we provide evidence that school spending improves theory-of-mind in childhood.

Suggested Citation

  • Fe, Eduardo & Gill, David & Prowse, Victoria, 2019. "Cognitive skills, strategic sophistication, and life outcomes," CAGE Online Working Paper Series 448, Competitive Advantage in the Global Economy (CAGE).
  • Handle: RePEc:cge:wacage:448
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    File URL: https://warwick.ac.uk/fac/soc/economics/research/centres/cage/manage/publications/448-2019_gill.pdf
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    Cited by:

    1. John A. List & Ragan Petrie & Anya Samek, 2021. "How Experiments with Children Inform Economics," NBER Working Papers 28825, National Bureau of Economic Research, Inc.

    More about this item

    Keywords

    Cognitive skills; theory-of-mind; cognitive ability; fluid intelligence; children; experiment; strategic sophistication; level-k; bounded rationality; non-equilibrium thinking; intentions; gift-exchange game; competitive game; strategic game; ALSPAC; social skills; adult outcomes; life outcomes; education; fertility; labor market; wages; employment; school spending; childhood intervention. JEL Classification: C91; D91; J24;
    All these keywords.

    JEL classification:

    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity

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