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Cognitive Skills, Strategic Sophistication, and Life Outcomes

We investigate how childhood cognitive skills affect strategic sophistication and adult outcomes, and we emphasize the importance of childhood theory of mind. Experimental data show that (i) theory-of-mind ability and cognitive ability both predict level k behavior, (ii) older children respond to information about the cognitive ability of their opponent, and (iii) theory of mind (but not cognitive ability) predicts whether children respond to intentions. Using longitudinal data, we find that childhood theory of mind and cognitive ability are both associated with enhanced adult social skills, higher educational participation, better educational attainment, and lower fertility in young adulthood. Finally, we provide evidence that school spending improves theory of mind.