Children's cognitive development: does parental wage employment matter?

Parental and family backgrounds play crucial roles in driving children’s cognitive development. However, in developing countries, self-employment is far more prevalent than wage employment. Despite its significance, limited research has examined how parental employment status influences cognitive development within this context. Given the potential benefits of wage employment for cognitive development, this study examines whether parents’ wage jobs could positively affect children’s cognitive skills. Using data on children aged 8-12 years old in Ethiopia, India, and Vietnam from the Young Lives Survey, we employ a value-added specification to analyze cognitive formation. Our findings reveal that fathers’ wage jobs have a positive effect on the cognitive scores of 8-year-old children in Ethiopia and Vietnam, ranging from 0.116 to 0.210 standard deviations of cognitive scores. The effect from fathers’ wage jobs is sizable compared to the effects from family, school, and neighborhood characteristics. However, such an effect is not found for 12-year-old children. By causal mediation analysis, it is proved that father wage jobs affect cognitive skills through material investment for 8-year-old children in Vietnam and Ethiopia. Our study provides the first empirical evidence regarding the effect of parental employment on the cognitive development of their children in the context of developing countries. Moreover, our empirical findings suggests that policies aimed at facilitating the transition of from informal to formal employment in developing countries may enhance human capital development.