Along with cognitive skills, noncognitive skills have been increasingly adopted to analyze individual behavior. My dissertation comprises of two chapters which combine economics with psychology theories and applied econometric methods to examine the role of noncognitive skills at different developmental stages; first, I study the formation of noncognitive skills in early childhood and, second, I examine the effect of noncognitive skills on the gender wage gap during mid- and late- adulthood. In the first chapter I propose a novel mechanism through which mothers produce high quality (skilled) children by focusing on maternal life satisfaction, which I interpret as maternal happiness. The goal of this first chapter is to identify a causal maternal life satisfaction effect on child outcomes, and to see if inferences about the effects of marriage remain after we have conditioned on maternal life satisfaction. Because happiness and family structure are entwined—with marriage potentially increasing happiness and happiness increasing the probability of marriage—I must separate the effects of happiness from the effects of marital status. Using data for U.K. children ages 3-7 from the Millennium Cohort Study, I simultaneously model maternal happiness, marital status, and a value-added, child skill production function; I use a cognitive test score and several behavioral scores as alternative child skill measures. This three-equation model accounts for the endogeneity of happiness and marital status, which enables me to identify separate causal effects of both on child cognitive and noncognitive skills. Embedded in chapter one is a discussion about an improved method for constructing cognitive and noncognitive skill measures. I calculate theta-scores from item response theory (IRT) models to account for the latent nature of child skills. I find that both marriage and happiness are predicted to improve test scores, with marriage primarily improving cognitive test scores and select noncognitive scores, and happiness leading only to better noncognitive scores. Because of these asymmetric effects, I conclude that pro-marriage policies have some merit, but because life satisfaction is also independently important for child development, a happy and healthy marriage is important, and life satisfaction is one of the main avenues through which non-married mothers may produce good quality children. I additionally show that, even though paternal happiness is not predictive of early child development, paternal presence matters for cognitive and noncognitive child development. By comparing children of married and cohabiting couples I find that marriage increases child skills relative to cohabitation, which suggests that marriage is inherently beneficial, due perhaps to higher spousal commitment.The second chapter is motivated by findings from previous studies that noncognitive skills are significant determinants of men's and women's wages, but they explain only 3-12% of these male-female differences. In this second chapter, I claim that the effect of noncognitive skills on the gender wage gap as documented in the existing literature may be underestimated because noncognitive skills affect not only the productivity of the workers (the direct effect), but also the selection of workers into occupations, which subsequently affects wages (the indirect effect). To identify these direct and indirect effects, I jointly model gender-specific occupational attainment and wage determination, and I then assess the effects of noncognitive skills on the gender wage gap with an Oaxaca wage decomposition. Using data from the National Child Development Study for workers from the United Kingdom at the ages of 33 and 50, I find that the magnitude of the contribution of noncognitive skills to the gender wage gap is underestimated by up to 18 percentage points when the indirect effect is overlooked; that is, noncognitive skills explain 10-20% of the gender wage gap. I also show that the contribution of noncognitive skills to the gender wage gap differs with age. At age 33, the gender wage gap decreases because of differences in endowments in noncognitive skills, suggesting that women directly benefit because of higher productivity in these skills. At age 50, the gender wage gap decreases because of differences in returns to these characteristics, suggesting that women benefit indirectly because they have sorted into occupations that reward their noncognitive skills. I conclude that noncognitive skills are indeed significant for explaining the gender wage gap, particularly among mid-career workers.
Economics, Noncognitive skills, life satisfaction, child development, item response theory, gender wage gap, cognitive skills, occupational choice
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