Child Development in the Early Years: Parental Investment and the Changing Dynamics of Different Domains

This paper uses the data on child development collected around the evaluation of a nursery program to estimate the details of the process of human development. We model development as made of three latent factors, reflecting health, cognitive and socio-emotional skills. We observe children from age 1 to age 7. We assume that, at each age, these factors interact among themselves and with a variety of other inputs to determine the level of development at following ages. The richness of the data we use allows us to: (i) let the dynamics be rich and flexible; (ii) let each factors play a role in the production of any other factor; (iii) estimate age-specific functional forms; (iv) treat parental investment as an endogenous input. We show that considering parental investment as endogenous affects the estimated level of its productivity. Furthermore, we find that the dynamics of the process can be richer than usually assumed, which determines the degree of persistence of different inputs in time. Persistence also changes with age. The way the productivity of different inputs and the persistence of the process change with age have important implications for the targeting of investment and interventions, and, therefore, the identification of windows of opportunities.