It’s All in the Stars: The Chinese Zodiac and the Effects of Parental Investments on Offspring’s Cognitive and Noncognitive Skill Development# Chih Ming Tan, Xiao Wang, and Xiaobo Zhang* March 2, 2020 Abstract The importance of (early) parental investments in children’s cognitive and noncognitive outcomes is a question of deep policy significance. However, because parental investments are arguably endogenous, empirically estimating their importance poses a challenge. This paper exploits a rich and novel dataset, the China Family Panel Studies, and proposes a culture- specific instrumental variable based on the Chinese zodiac, in order to identify the impact of parental investments. By looking at the outcomes of children born just before and just after the cutoff for a “lucky” (or “nonlucky”) zodiac sign, we find that parents’ investments have significant effects on their offspring’s development of both cognitive and noncognitive skills. Keywords: Cognitive Skills; Noncognitive Skills; Parental Investments; Zodiac Signs; China JEL Codes: I10; I15; J24; O12; O53 # Tan thanks the Greg and Cindy Page Faculty Distribution Fund for financial support. We thank Xin Zhang, and all participants at conferences and seminars that provided us insightful comments and suggestions. * Tan (corresponding author): Department of Economics & Finance, Nistler College of Business and Public Administration, University of North Dakota, Gamble Hall, 293 Centennial Drive, Grand Forks, ND 58202- 8369, US. Tel: (701) 777-3349.
[email protected]. Wang: International Institute of Finance, School of Management, University of Science and Technology of China, 96 Jinzhai Road, Hefei, Anhui, 230026, People’s Republic of China.
[email protected]. Zhang: National School of Development, Peking University, Beijing 100871, China, and International Food Policy Research Institute, 1201 Eye St., NW, Washington, DC 20005, US.