Context, Skills and Social Progress: Evidence from Germany

Abstract

This study provides life-cycle evidence on the relationship between childhood investments (contexts), cognitive and non-cognitive skills, and life out-comes (social progress). From a policy perspective, societies are interested in generating high levels of social progress. We therefore investigate how Germany performs in terms of aggregate social progress and how individual life success is generated empirically through higher levels of skills and childhood rearing condi-tions. The empirical analysis is based on three different individual datasets that complement each other in the measurement of context, skills and social progress. Our findings suggest that, compared to other countries, the aggregate level of social progress in Germany is high. Moreover we show that, at the individual level, skills provide an important link between childhood contexts and adult social pro-gress. Based on factor modeling, our results indicate that environmental stimula-tion during childhood improves cognitive and mental skills and that environmental responsiveness positively affects mental skills, emotional skills and personality. Cognitive, mental and emotional skills in turn are all highly predictive of academic performance and skills and personality traits together drive societal engagement. Moreover, better cognitive and mental skills can help to cope with life burdens. We show that skills do not have a large direct effect on health, but that personali-ty traits drive both health and health behaviors. Based on our findings, we derive policy recommendations and ideas for future research.