Eliciting Maternal Beliefs about the Technology of Skill Formation

In general, economic models of human development assume that mothers have rational expectations about the technology of skill formation, that is, about the process that determines how their offspring develop skills in socio-emotional and cognitive domains. This assumption implies that all women -- regardless of their race, education, or socio-economic status -- have the correct information regarding how investments affect the development of their children. When such models are structurally estimated, the variation in observed investments across families is attributed to shocks, heterogeneity in the characteristics of the children or families, but not to the heterogeneity in the knowledge base of the mother. In this paper, we test whether this assumption is accurate. To execute this task, we analyze the data collected by the Maternal Knowledge of Infant Development Survey (MKIDS). An attractive feature of the dataset is that it asks subjects about their beliefs regarding the impact of investments on child development. In addition, we analyze the child development data from the CNLSY/79 to obtain an objective estimate of the technology of skill formation. By comparing the objective estimates with subjective beliefs, we are able to determine the accuracy of maternal beliefs about the technology of skill formation. We find large heterogeneity in beliefs about the returns to investments. More importantly, we find that the median woman tends to underestimate the impact of investments in the human capital of children. The underestimation is more pronounced when the children's health conditions at birth are poor.