Formulating, Identifying and Estimating the Technology of Cognitive and Noncognitive Skill Formation

This paper estimates models of the evolution of cognitive and noncognitive skills and explores the role of family environments in shaping these skills at different stages of the life cycle of the child. Central to this analysis is identification of the technology of skill formation. We estimate a dynamic factor model to solve the problem of endogeneity of inputs and multiplicity of inputs relative to instruments. We identify the scale of the factors by estimating their effects on adult outcomes. In this fashion we avoid reliance on test scores and changes in test scores that have no natural metric. Parental investments are generally more effective in raising noncognitive skills. Noncognitive skills promote the formation of cognitive skills but, in most specifications of our model, cognitive skills do not promote the formation of noncognitive skills. Parental inputs have different effects at different stages of the child’s life cycle with cognitive skills affected more at early ages and noncognitive skills affected more at later ages. Flavio Cunha is an assistant professor of economics at the University of Pennsylvania. James J Heckman is a professor of economics at the University of Chicago, American Bar Foundation and University College Dublin. This research was supported by NIH R01-HD043411, NSF SES-024158, the Committee for Economic Development with a grant from the Pew Charitable Trusts and the Partnership for America’s Economic Success, and the J.B. Pritzker Consortium on Early Childhood Development at the Harris School of Public Policy, University of Chicago. Flavio Cunha also acknowledges support from the Claudio Haddad dissertation fund at the University of Chicago and Dr. Rob Dugger. The views expressed in this paper are those of the authors and not necessarily those of the funders listed here. The first draft of this paper was presented at a conference at the Minneapolis Federal Reserve, October 2003. The authors received helpful comments from Robert Pollak at a seminar at Washington University, February 2004, from Susanne Schennach who is a coauthor of a successor paper, Petra Todd, and Kenneth Wolpin. They also received helpful comments from the editor and three anonymous referees. A website containing supplementary material is available at http://jenni.uchicago.edu/idesttech. The data used in this article can be obtained beginning May 2009 through April 2012 from James J. Heckman, University of Chicago, Department of Economics, 1126 E. 59 Street, Chicago IL 60637; [email protected]. 1⁄2Submitted May 2006; accepted December 2006 ISSN 022-166X E-ISSN 1548-8004 2008 by the Board of Regents of the University of Wisconsin System THE JOURNAL OF HUMAN RESOURCES d XLIII d 4