In recent years, development economists have found that childhood living conditions are an important determinant of later-life outcomes such as health, income or human capital. When it comes to the childhood formation of non-cognitive skills and preferences, however, research is still in the early stages.
In this paper, the author investigates the impact of living conditions at three periods of childhood (respectively age 8, 12 and 15) on the formation of risk and time preferences at age 15. These preferences are important ingredients for a person’s ability to make sound (economic) decisions.
Using a sample of 1,000 children in Vietnam, the author finds evidence that parental investment (environment) at age 8, as well as various negative shocks to living conditions throughout childhood are associated with more risk averse and/or more impatient children at age 15. Afterwards, I investigate the predictive value of risk and time preferences at age 15 on the incidence of ‘risky behaviour’ (smoking and drinking), teen pregnancy and teen marriage at age 19.
The author finds evidence that risk-averse children have a 1% higher chance of being married and/or pregnant at age 19, but a marginally lower chance of engaging in risky behaviour. For time references, there is no effect.