Collaborative Research: Household Decision-Making and Child Development

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The goal of this research is to broaden understanding of the cognitive development of children using a modeling framework that allows to incorporate direct measures of investment activity by parents, children, and schools in the production of the child's cognitive ability from birth through adolescence. The first project studies the transition of investment in child cognitive ability from the parents to the child over the development phase. The factors driving the transition include: the increased productivity of self-investment as the child ages; increases in the child?s future orientation (reflected in age-specific discount factors that are increasing in age); and (exogenous and endogenous) changes in the child?s role in household decision-making. The PIs will formulate and estimate both non-cooperative and cooperative models of interactions between parents and children. The second project investigates the role of formal schooling in the cognitive development process. As observed in the Child Development Supplement data from the Panel Study of Income Dynamics, time spent with children declines dramatically (particularly for mothers) when children begin formal schooling. Within the modeling framework, schooling is viewed as a new "factor of production" that enters the child production function when the child first enters formal schooling. Jointly modeling both school and parental inputs is an important contribution to a literature which largely considers each in isolation. The CDS-PSID contains information not only on the geographic location of sample respondents, but also specific information on the quality of the school that each child attends. Understanding the cognitive development process and the role that various actors play in it is essential for the formulation of effective policies to achieve better developmental outcomes. The PIs will use estimates from these models to perform comparative statics exercises and counterfactual policy experiments that have the potential to inform policy, such as the efficacy of parental leaves or the design of effective unconditional and conditional cash transfer (CCT) programs.