The Economic Value of Breaking Bad - CiteSeerX

Apr 4, 2015 - Next, we estimate a model of education decisions and labor market outcomes ...... and Xi,P A are observables with coefficients βPA. Again γs ...
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The Economic Value of Breaking Bad : Misbehavior, Schooling and the Labor Market∗ Nicholas W. Papageorge† Department of Economics, Johns Hopkins University Victor Ronda‡ Department of Economics, Johns Hopkins University Yu Zheng§ Department of Economics and Finance, City University of Hong Kong April 4, 2015 Abstract: Prevailing research argues that childhood misbehavior in the classroom is bad for schooling and, presumably, bad overall. In contrast, we argue that childhood misbehavior captures underlying non-cognitive skills that are potentially valuable in the labor market. We follow work from psychology and summarize observed classroom misbehavior as two underlying latent factors. Next, we estimate a model of education decisions and labor market outcomes, allowing the impact of each of these two factors to vary by outcome. We show the first evidence that one of the factors driving childhood misbehavior, discussed in psychological literature as externalizing behavior (and linked, for example, to aggression), does indeed reduce educational attainment, but also increases earnings. This finding highlights a broader point: non-cognitive skills are not well summarized as a one-dimensional object that is either good or bad per se. Using the estimated model, we assess competing pedagogical policies. We find that policies aimed at eliminating externalizing behavior increase schooling attainment, but also reduce earnings. In comparison, policies that decrease the schooling penalty of externalizing behavior increase both schooling and earnings. Keywords: Labor, Education, Non-Cognitive Skills JEL Classification: J10 J20 I20 ∗ We gratefully acknowledge helpful comments from: Seth Gershenson, Barton Hamilton, Hans von Kippersluis, Patrick McAlvanah, Robert Moffitt, Albert Park and Richard Spady along with the seminar participants at the City University of Hong Kong, Tinbergen Institute, the Brookings Institution and Georgetown University. The usual caveats apply. † [Corresponding author] [email protected][email protected] § [email protected]

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Introduction

A burgeoning literature in economics has established that non-cognitive skills drive a wide variety of socially relevant behaviors and outcomes (Heckman and Rubinstein, 2001). These skills, which encompass character or personality, are sometimes called soft skills, character skills or social skills and have been shown to influence labor supply, earnings, health, education and partnership. Nevertheless, a critical feature of non-cognitive skills has received scant attention in previous literature. Though few would argue that better health and stronger cognition improve outcomes on most any conceivable dimension, it is generally not meaningful to think of non-cognitive skill as a one-dimensional object that is either good or bad per se. For example, some non-cognitive skills are productive in one employment sector and counterproductive in another. Still others seem to capture preferences for activities in which they simultaneously lower productivity. Moreover, these skills are relatively mutable, at least until about age 30, which suggests that interventions during childhood could be designed to modify them.1 If such interventions are designed around the role that non-cognitive skills play in economic outcomes, a clear understanding of their impacts, including sector-specific differences in their returns, is of enormous policy relevance. In this paper, we examine a widely-studied pair of non-cognitive skills, both of which are identified from teachers’ measurements of misbehavior or maladjustment among schoolchildren. The skills in question are known as externalizing behavior and internalizing behavior.2 Externalizing behavior is often linked to antisocial behavior, rule-breaking and conduct disorders. Examples of associated behaviors include displays of aggression, delinquency and hyperactivity (Aizer, 2008). Internalizing behavior, on the other hand, is linked to anxiety and depression (Duncan and Magnuson, 2011; Duncan and Dunifon, 20