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An early start in life is a good start
A'la James Heckman, the importance of early life for economic outcomes seems only to grow:
Is lifetime inequality mainly due to differences across people established early in life or to differences in luck experienced over the working lifetime? We answer this question within a model that features idiosyncratic shocks to human capital, estimated directly from data, as well as heterogeneity in ability to learn, initial human capital, and initial wealth -- features which are chosen to match observed properties of earnings dynamics by cohorts. We find that as of age 20, differences in initial conditions account for more of the variation in lifetime utility, lifetime earnings and lifetime wealth than do differences in shocks received over the lifetime. Among initial conditions, variation in initial human capital is substantially more important than variation in learning ability or initial wealth for determining how an agent fares in life. An increase in an agent's human capital affects expected lifetime utility by raising an agent's expected earnings profile, whereas an increase in learning ability affects expected utility by producing a steeper expected earnings profile.
The emphasis is mine; here is the whole paper. Here is a non-gated version. In other words, treat your kids well, invest in them, and realize that determinism is not altogether crazy. Here is a related paper about how mental health problems in childhood plague later life and earnings.
Posted by Tyler Cowen on July 6, 2007 at 06:12 AM in Education | Permalink
Comments
I wonder what Judith Rich Harris would think of the paper in question.
Posted by: michael vassar at Jul 6, 2007 8:43:55 AM
controlled for iq, or no?
Posted by: adrian at Jul 6, 2007 9:49:03 AM
By the time a person reaches age 20 their stock of human capital may be largely a function of their intelligence/ability to learn. So it seems a bit odd to suggest that human capital as of age 20 is more significant than ability to learn.
Posted by: henry evans at Jul 6, 2007 11:18:25 AM
In a related vein of research, my classmate has a paper that shows that there are long-term effects from an initial negative labor market shock, i.e. graduating college in a recession.
Posted by: Jodi N. Beggs at Jul 6, 2007 12:00:30 PM
Can somebody explain how "human capital" and "learning ability" are defined and measured in this paper? I skimmed the whole thing but found it frustratingly vague about what they are actually talking about.
Posted by: Steve Sailer at Jul 6, 2007 2:25:02 PM
Can somebody explain how "human capital" and "learning ability" are defined and measured in this paper? I skimmed the whole thing but found it frustratingly vague about what they are actually talking about.
Posted by: Steve Sailer at Jul 6, 2007 2:27:47 PM
I got my MBA during the recession year of 1982 and it no doubt cost me some salary for much of the rest of my corporate career. Something else that I noticed was how much higher in quality we 1981-1983 hires were at my company than the subsequent 1984 onward hires. My firm was one of the few that was hiring briskly during the recession, so it had its pick of the litter of new grads. From 1984 onward, there was much more competition from other firms for new grads, so our quality went down.
Posted by: Steve Sailer at Jul 6, 2007 2:48:44 PM
The paper mentions Henry's point:
>Initial human capital and learning ability are positively correlated in the initial distribution which best matches the earnings distribution facts. This may suggest to some that the importance of learning ability differences relative to human capital differences would be greater if one were to evaluate lifetime inequality at a younger age. Some intuition for this position would be that learning ability is crystallized before age 20 and that learning ability differences are an important source of human capital differences as of age 20. We think that such a line of reasoning is valuable to pursue. However, pushing back the age at which lifetime inequality is evaluated will raise the issue of the importance of one's family more directly than is pursued here. The importance of one's family and one's environment up to age 20 is not modeled in our work but is implicitly captured through their impact on initial conditions: human capital, learning ability and initial wealth.
Some peoples initial human capital as of age 20 is being a junior at Harvard.
Posted by: joeo at Jul 6, 2007 4:01:36 PM
That makes a lot of sense to me, though not necessarily for talent reasons. Where someone is in life at age 20 largely depends on two factors:
1) How well one's parents have been doing, and
2) How well one has avoided life's major perils -- drug addiction, chronic disease, accident, etc.
My friends who have been successful in life have nearly all had (1) and (2). The ones who were marginally successful had (1) or (2). The ones who've done poorly had neither -- or didn't have (1) or (2) in some extreme fashion. Talent seemed only to act as a multiplier for whatever ended up happening.
End of the meritocracy, I guess.
Posted by: Kimmitt at Jul 6, 2007 8:36:42 PM
I assume that nobody has any idea what this paper claims to measure?
Posted by: Steve Sailer at Jul 7, 2007 1:53:44 AM
"I assume that nobody has any idea what this paper claims to measure?"
Steve, seriously, isn't that putting too fine a point on things? We're talking JAMES HECKMAN here!
Posted by: westerly at Jul 8, 2007 8:43:48 AM
...We're talking JAMES HECKMAN here!
better check yo' self Westerly, JS still has a drivers license...
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