Psychosocial status and cognitive achievement in Peru

The aim of this paper is to assess the importance of psychosocial status in the accumulation of cognitive skills during the transition from mid to late childhood. We use longitudinal data from a cohort of 700 Peruvian children drawn from a very rich dataset, the Young Lives survey, to test the impact of children’s perception of respect at the age of 8 on cognitive achievement four years later, controlling for cognitive skills at the age of 8, lagged child and household characteristics, and community fixed effects. This empirical specification is akin to estimating a conditional demand function for cognitive skills, which deals with some of the main pitfalls of skill endogeneity. We find that poorly respected children are linked to a lower rate of cognitive accumulation than their better-respected counterparts. A child’s perception of respect increases later cognitive achievement by about 7 per cent of a standard deviation, a substantial effect given the marginal contribution of other cognitive determinants. As expected, we also find that previously accumulated cognitive skills enable higher subsequent cognitive skill accumulation. We go one step further by testing and finding evidence of complementarities across skills. We show that cognitive differences amplify over time between children with low and high psychosocial skills. Overall, our results suggest that psychosocial status, an aspect little studied in the context of developing countries, plays an important role in the acquisition of cognitive skills during childhood