The Nurture of Nature and the Nature of Nurture: How Genes and Investments Interact in the Formation of Skills

Abstract

This paper studies the interplay between genetics and family investments in the process of skill formation. We model and estimate the joint evolution of skills and parental investments throughout early childhood. We document three genetic mechanisms: the direct effect of child genes on skills, the indirect effect of child genes via parental investments, and family genetic influences captured by parental genes. We show that genetic effects are dynamic, increase over time, and operate via environmental channels. Our paper highlights the value of integrating biological and social perspectives into a single unified framework. (JEL I24, I26, J12, J13, J24)