Does Unsatisfactory Subjective Well‐Being of School Children Decrease their Cognitive Skill Development?*

This study examines the heterogeneous effect of subjective well‐being on the cognitive development of school‐age children in developing countries based on the Young Lives Longitudinal Survey. A fixed‐effects specification, an instrumental variable approach with parental subjective well‐being as the instrument, and quantile IV estimations show that low subjective well‐being leads to a 2–3 month developmental delay. The effect is heterogeneous across the cognitive development distribution, appearing stronger for the lower part of the distribution and weakening at the top end. Additionally, the precise shape of this gradient differs between genders, locations, and school types.