TY - JOUR AU - Cunha,Flavio AU - Heckman,James J. AU - Lochner,Lance AU - Masterov,Dimitriy V. TI - Interpreting the Evidence on Life Cycle Skill Formation JF - National Bureau of Economic Research Working Paper Series VL - No. 11331 PY - 2005 Y2 - May 2005 UR - http://www.nber.org/papers/w11331 L1 - http://www.nber.org/papers/w11331.pdf N1 - Author contact info: Flavio Cunha Department of Economics University of Pennsylvania 160 McNeil Building 3718 Locust Walk Philadelphia, PA 19104-6297 Tel: 215/898-5652 E-Mail: fcunha@sas.upenn.edu James J. Heckman Department of Economics The University of Chicago 1126 E. 59th Street Chicago, IL 60637 Tel: 773/702-0634 Fax: 773/702-8490 E-Mail: jjh@uchicago.edu Lance Lochner Department of Economics, Faculty of Social Science University of Western Ontario 1151 Richmond Street, North London, ON N6A 5C2 CANADA Tel: 519/661-2111 ext. 85281 Fax: 519/661-3666 E-Mail: llochner@uwo.ca Dimitriy Masterov Department of Economics University of Michigan 107 Lorch Hall 611 Tappan Street Ann Arbor, MI 48109-1220 E-Mail: dvmaster@umich.edu AB - This paper presents economic models of child development that capture the essence of recent findings from the empirical literature on skill formation. The goal of this essay is to provide a theoretical framework for interpreting the evidence from a vast empirical literature, for guiding the next generation of empirical studies, and for formulating policy. Central to our analysis is the concept that childhood has more than one stage. We formalize the concepts of self-productivity and complementarity of human capital investments and use them to explain the evidence on skill formation. Together, they explain why skill begets skill through a multiplier process. Skill formation is a life cycle process. It starts in the womb and goes on throughout life. Families play a role in this process that is far more important than the role of schools. There are multiple skills and multiple abilities that are important for adult success. Abilities are both inherited and created, and the traditional debate about nature versus nurture is scientifically obsolete. Human capital investment exhibits both self-productivity and complementarity. Skill attainment at one stage of the life cycle raises skill attainment at later stages of the life cycle (self-productivity). Early investment facilitates the productivity of later investment (complementarity). Early investments are not productive if they are not followed up by later investments (another aspect of complementarity). This complementarity explains why there is no equity-efficiency trade-off. for early investment. The returns to investing early in the life cycle are high. Remediation of inadequate early investments is difficult and very costly as a consequence of both self-productivity and complementarity. ER -