On The Production of Skills and the Birth Order Effect

Data indicate that on average firstborn children outperform their younger siblings on measures such as test score, wages, educational attainment, employment, etc. Using data from the Children of the National Longitudinal Survey of Youth 1979, I also find evidence of a sizeable firstborn effect on many cognitive tests, a pattern that is robust to the inclusion of family level fixed effects and other controls. However, I also document considerable gaps in parental investment across birth order. Using a framework similar to Cunha and Heckman (2008) and Cunha et al. (2010), I estimate that differences in the provision of parental inputs across siblings can account for 20% to 45% of the gap in cognitive skills between firstborn children and their subsequent siblings. This framework can control for endogeneity in parental inputs, measurement error, missing observations, and for the dynamic impact of parental investments.