The dynamics of skill formation : Evidence from a Flemish cohort study

In this paper, we focus on the evolution of both cognitive and non‐cognitive skills during adolescence. We use the framework developed by James Heckman and others who characterize the process of skill formation as a dynamic process in which skill begets skill. We first discuss the formalization of these dynamics by self‐productivities, cross‐productivities and complementarities. Next, we estimate dynamic models of skill formation during adolescence and provide empirical evidence for these dynamics for a cohort of students in Flanders. As the focus lies on the development of skills during adolescence, we supplement the out‐of‐school, family based drivers of skill differences by a vector of school investments. Next to a more complete modelling of input differences, this allows to focus on the impact of differential treatment within the educational system on generating skills differences. More specifically, we examine the role of tracking in the skill formation process and discuss its implications with respect to efficiency and equity. From a methodological perspective, we supplement the traditional production function approach by adressing the problems of endogeneity of inputs.