On April 21, the Faculty of Economics and Business (FEB) at KU Leuven was honored by the visit of Professor James Heckman. In 2000 he received the Nobel Prize in Economics for developing the ‘Heckman correction’ (or Heckit method), a statistical method used to correct for selection bias in research data. More recently, his research has focused on the economics of child development. Among other things, he has shown that investments in young children (the ‘Heckman Curve’) yield the highest social returns.
In the prestigious Promotiezaal of the University Halls in Leuven, Professor Heckman presented the results of one of his latest research projects: ‘Relating Cognitive Skills and Personality Traits to Economics Preferences. A study of Chinese children’. This project was conducted in collaboration with Cesar Chaves, Shuaizhang Feng and Zhe Yang.
The project investigates the relationship between children’s cognitive skills, their personality traits and their economic preferences, in particular with regard to risk. Estimating this relationship is challenging because choices are typically subject to cognitive noise and guessing – that is, imprecision and randomness in decision-making. Professor Heckman and his associates developed a model that explicitly accounts for these factors, while also integrating cognitive skills (IQ), personal traits and family background (urban versus rural). They estimated this model using detailed data on about 2,200 Chinese schoolchildren (1,115 male and 1,089 female, all in fifth grade).
One of the surprising findings is that boys appear to be more risk-averse than girls, while conventional findings suggest exactly the opposite. On top of that, boys tend to engage more in ’guessing’ while girls show more deliberation. For both genders, however, no difference was found in loss aversion.
Professor Heckman said that the changing roles and position of girls in modern society may help explain some of his rather surprising results. At the same time, he cautioned that results may differ for children in older age groups, as data from sixth- or seventh-grade students have yet to be analyzed.
Lukas Mahler and Fa Quix