ABSTRACT

The experiences in the first few years of children are critical in shaping their future lives and ensuring that they achieve their full potential. Research has shown that both cognitive and non-cognitive abilities are important determinants of future socioeconomic outcomes, health and wellbeing. Furthermore, the activities that parents carry out with children at home (parental input or investment) have a significant effect in children's development. Using the Millennium Cohort Study we estimate a dynamic factor model of child development in the UK applying the framework of Cunha and Heckman (2008). Exploiting the wealth of information in the dataset, our model of development follows children from birth until seven years of age. We find a significant self-productivity effect in both cognitive and non-cognitive development. We also find evidence of dynamic dependence across different abilities; non-cognitive development increases cognitive development in the following period but cognitive development only appears to influence significantly non-cognitive development in the pre-school years. Parental investment is another significant influence in childrens developmental trajectories. Furthermore, we find substantial evidence of two distinct parental investment latent variables which evolve over time.