Cognitive Skills, Strategic Sophistication, and Life Outcomes

Eduardo Fe (), David Gill and Victoria Prowse
Additional contact information
Eduardo Fe: University of Strathclyde

No 13901, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: We investigate how childhood cognitive skills affect strategic sophistication and adult outcomes. In particular, we emphasize the importance of childhood theory-of-mind as a cognitive skill. We collected experimental data from more than seven hundred children in a variety of strategic interactions. First, we find that theory-of-mind ability and cognitive ability both predict level-k behavior. Second, older children respond to information about the cognitive ability of their opponent, which provides support for the emergence of a sophisticated strategic theory-of-mind. Third, theory-of-mind and age strongly predict whether children respond to intentions in a gift-exchange game, while cognitive ability has no influence, suggesting that different measures of cognitive skill correspond to different cognitive processes in strategic situations that involve understanding intentions. Using the ALSPAC birth-cohort study, we find that childhood theory-of-mind and cognitive ability are both associated with enhanced adult social skills, higher educational participation, better educational attainment, and lower fertility in young adulthood. Finally, we provide evidence that school spending improves theory-of-mind in childhood.

Keywords: life outcomes; cognitive skills; theory-of-mind; cognitive ability; fluid intelligence; children; experiment; strategic sophistication; level-k; bounded rationality; non-equilibrium thinking; intentions; gift-exchange game; competitive game; strategic game; ALSPAC; social skills; adult outcomes; education; fertility; labor market; wages; employment; school spending; childhood intervention (search for similar items in EconPapers)
JEL-codes: C91 D91 J24 (search for similar items in EconPapers)
Pages: 118 pages
Date: 2020-11
New Economics Papers: this item is included in nep-cbe, nep-edu, nep-evo, nep-exp and nep-neu
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Citations: View citations in EconPapers (9)

Published - published in: Journal of Political Economy, 2022, 130 (10), 2643–2704

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Related works:
Journal Article: Cognitive Skills, Strategic Sophistication, and Life Outcomes (2022)
Working Paper: Cognitive skills, strategic sophistication, and life outcomes (2021)
Working Paper: Cognitive skills, strategic sophistication, and life outcomes (2021)
Working Paper: Cognitive skills, strategic sophistication, and life outcomes (2019)
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