The relative economic importance of academic, psychological and behavioural attributes developed in childhood

(2000) - Leon Feinstein

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Abstract

It is well known that the observed academic ability of school children is associated with subsequent earnings even conditioning for qualifications obtained. It is also established that omission of ability leads to over-estimates of the return to schooling or qualifications. Only recently, however, have economists begun to address the importance of what has been called “psychological capital” for productivity and hence wages and this research is still at a very early stage. There has as yet been no longitudinal investigation of the relative importance of the academic and non-academic abilities developed in childhood for subsequent economic outcomes including wages. This paper considers a wide range of assessments of the abilities that children have already developed by age ten and uses a sequential analysis to consider the importance these different aspects of age ten ability have for subsequent development and economic success. The social class a child is born into has a strong bearing on how well he or she performs at school, qualifications attained and subsequent productivity and earnings1. The paper explores how the development of children by ten influences subsequent educational and economic progress differently for children from different social backgrounds. This wider set of abilities and attributes, therefore, also enables an assessment of the role of the wider range of childhood attributes and skills as channels for intergenerational transmission of education and earnings. By showing that measures of psychological and behavioural attributes provide important signals about future economic outcomes, the paper suggests that schooling should not be too narrowly assessed. The paper also makes use of the age ten scores to show how different are the processes of human capital development and the determinants of individual productivity in work. The data come from the 1970 British Cohort Study (BCS). This is a longitudinal study of all the children born in the UK in the first week of April 1970 and surveyed again in 1975, 1980, 1986, 1991 and 1996. Particular use is made of the 1980 Child Health and Education Study (CHES) and 1996 sweeps. At age ten, under the supervision of the Department of Child Health at Bristol University, the children were tested for standard maths and reading ability but also for the psychological attributes of self-esteem and locus of control described below and for the behavioural attributes of conduct disorder, peer relations, attentiveness and extraversion. Age twenty-six information is then available on highest qualification attained, earnings and periods of unemployment. The first section describes the methodology and data. The second considers the importance of age ten attributes and abilities for subsequent educational progress, the third for labour market outcomes. Having then established their importance, the fourth section considers the production of the age ten abilities themselves and concludes.

Notes

“It is found that this previously unobserved individual heterogeneity has very substantial implications for the labour market. The returns to education are not significantly reduced by this omission bias but there is evidence of substantial returns to the production of non-academic ability.” (Feinstein, 2000, p. 1)

“Finally, whereas age ten maths ability is a good predictor of subsequent educational development for children from high SES families, reading is the stronger predictor for children from low SES groups.” (Feinstein, 2000, p. 1)