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We estimate a dynamic factor model of human-capital formation where childhood cognition and health are generated from previous stocks of child abilities, parental investments, parental abilities, and genetic endowments. In the absence of better data, the human-capital formation literature has typically proxied genetic endowments by using data on birth outcomes. We show that genetic endowments, measured by both educational attainment and polygenic indices (PGIs) for birth weight, are significant predictors of children's socio-emotional abilities and health. We also show, however, that their effect is small relative to that of parental characteristics and parental investments. We conclude with a discussion of planned next steps such as the addition of more time periods, the direct estimation of a parental investment function, and the estimation of direct genetic effects by controlling for parental PGIs.
Marina Aguiar Palma, Vrije Universiteit Amsterdam and Fundacao Getulio Vargas-Rio de Janeiro
Sjoerd van Alten, Vrije Universiteit Amsterdam and Tinbergen Institute
Titus Galama, Vrije Universiteit Amsterdam and University of Southern California
Maarten Lindeboom, Vrije Universiteit Amsterdam
Soraya Roman, Fundacao Getulio Vargas-Rio de Janeiro