Towards Causal Estimates of Children’s Time Allocation on Skill Development

Cognitive and noncognitive skills are critical for a host of economic and social outcomes as an adult. While there is broad agreement that a significant amount of skill acquisition and development occurs early in life, the precise activities and investments that drive this process are not well understood. In this paper we examine how children’s time allocation affects their accumulation of skill. Children’s time allocation is endogenous in a model of skill production since it is chosen by parents and children. We apply a recently developed test of exogeneity to search for models that yield causal estimates of the impact time inputs have on child skills. We show that the test, which exploits bunching in time inputs induced by a non-negativity time constraint, has power to detect endogeneity stemming from omitted variables, simultaneity, measurement error, and several forms of model misspecification. We find that with a sufficiently rich set of controls, we are unable to reject exogeneity in our most detailed production function specifications. The estimates from these models indicate that active time with adult family members, such as parents and grandparents, are the most productive in generating cognitive skill.