The Role of parental investments for cognitive and noncognitive skill formation – Evidence for the first 11 years of life

This paper examines the impact of parental investments on the development of cogni-tive, mental and emotional skills during childhood using data from a longitudinal study, the Mannheim Study of Children at Risk, starting at birth. Our work offers three impor-tant innovations. First, we use reliable measures of the child’s cognitive, mental and emotional skills as well as accurate measures of parental investment. Second, we esti-mate latent factor models to account for unobserved characteristics of children. Third, we examine the skill development for children who were born with either organic or psychosocial risk separately. We find a decreasing impact of parental investments on cognitive and mental skills, while emotional skills seem to be unaffected by parental investment throughout childhood. Thus, initial inequality persists during childhood. Since families are the main sources of education during the first years of life, our results have important implications for the quality of the parent-child relationship.