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Cognitive skills, strategic sophistication, and life outcomes

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  • Eduardo Fe
  • David Gill
  • Victoria Prowse

Abstract

We investigate how childhood cognitive skills affect strategic sophistication and adult outcomes, and we emphasize the importance of childhood theory of mind. Experimental data show that (i) theory-of-mind ability and cognitive ability both predict level k behavior, (ii) older children respond to information about the cognitive ability of their opponent, and (iii) theory of mind (but not cognitive ability) predicts whether children respond to intentions. Using longitudinal data, 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.
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Suggested Citation

  • Eduardo Fe & David Gill & Victoria Prowse, 2021. "Cognitive skills, strategic sophistication, and life outcomes," Purdue University Economics Working Papers 1329, Purdue University, Department of Economics.
    • Handle: RePEc:pur:prukra:1329
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    File URL: https://business.purdue.edu/research/working-papers-series/2021/1329.pdf
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    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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