Abilities, Attitudes, Behaviors and their Effects on Economic Outcomes

Abstract

This thesis takes latent variables seriously. It consists of three chapters discussing the determinants of economic success for a British cohort. The evidence presented shows that abilities during childhood and adolescence are important predictors of adult educational, labor market and social outcomes. The problem is that abilities are unobserved. I hence rely on a novel item response theory method (Spady 2007) to measure these unobservables by using questions that are related to them. The assumption is that the latent variables cause the outcomes of interest but also the answers to questions that provide the basis for their measurement.