The Economic Value of Breaking Bad: Misbehavior, Schooling and the Labor Market
Prevailing research argues that childhood misbehavior in the classroom is bad for schooling and, presumably, bad for labor market outcomes. In contrast, we argue that some childhood misbehavior represents underlying socio-emotional skills that are valuable in the labor market. We follow work from psychology and categorize observed classroom misbehavior into two underlying latent factors. We then estimate a model of educational attainment and earnings outcomes, allowing the impact of each of the two factors to vary by outcome. We find that one of the factors, labeled in the psychological literature as externalizing behavior (and linked, for example, to aggression), reduces educational attainment yet increases earnings. Unlike most models where socio-emotional skills that increase human capital through education also increase labor market skills, our findings illustrate how some socio-emotional skills can be productive in some economic contexts and counter-productive in others. Policies designed to promote human capital accumulation could therefore have mixed effects or even negative economic consequences, especially in the case of policies that target socio-emotional skill formation for children or adolescents which are aimed solely at improving educational outcomes.
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Document Object Identifier (DOI): 10.3386/w25602