Cognitive Skills, Strategic Sophistication, and Life Outcomes

118 Pages Posted: 1 Dec 2020 Last revised: 16 Aug 2022

See all articles by David Gill

David Gill

Purdue University, Department of Economics

Victoria L. Prowse

Purdue University - Department of Economics; IZA Institute of Labor Economics; German Institute for Economic Research (DIW Berlin)

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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: adult outcomes, social skills, ALSPAC, strategic game, competitive game, gift-exchange game, intentions, non-equilibrium thinking, bounded rationality, level-k, strategic sophistication, experiment, children, fluid intelligence, cognitive ability, theory-of-mind, cognitive skills, life outcomes, education, fertility, labor market, wages, employment, school spending, childhood intervention

JEL Classification: C91, D91, J24

Suggested Citation

Gill, David and Prowse, Victoria L., Cognitive Skills, Strategic Sophistication, and Life Outcomes. IZA Discussion Paper No. 13901, Available at SSRN: https://ssrn.com/abstract=3738843

David Gill

Purdue University, Department of Economics ( email )

610 Purdue Mall
West Lafayette, IN 47907
United States

Victoria L. Prowse

Purdue University - Department of Economics ( email )

West Lafayette, IN 47907-1310
United States

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

German Institute for Economic Research (DIW Berlin) ( email )

Mohrenstra├če 58
Berlin, 10117
Germany

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