It Takes a Village: The Economics of Parenting with Neighborhood and Peer Effects

Abstract

As children reach adolescence, peer interactions become increasingly central to their development, whereas the direct influence of parents wanes. Nevertheless, parents may continue to exert leverage by shaping their children's peer groups. We study interactions of parenting style and peer effects in a model where children's skill accumulation depends on both parental inputs and peers, and where parents can affect the peer group by restricting who their children can interact with. We estimate the model and show that it can capture empirical patterns regarding the interaction of peer characteristics, parental behavior, and skill accumulation among US high school students. We use the estimated model for policy simulations. We find that interventions (e.g., busing) that move children to a more favorable neighborhood have large effects but lose impact when they are scaled up because parents' equilibrium responses push against successful integration with the new peer group.

The Social Side of Early Human Capital Formation: Using a Field Experiment to Estimate the Causal Impact of Neighborhoods

“…In Tables D. 3 and D.4, we perform a similar exercise with the sample we use in our individualfixed effects analysis. We start with a stripped-down specification in column (1), which includes no controls, and we gradually add controls as we move to column (6), which includes block-group fixed effects, time fixed effects, cohort fixed effects, race fixed effects and gender fixed effects. In column (7), we present the estimated effects from our fixed effects model for the same sample.…”

The Social Side of Early Human Capital Formation: Using a Field Experiment to Estimate the Causal Impact of Neighborhoods

“…Therefore, direct exposure to treated children who live in the same neighborhood is a likely mechanism that can generate spatial spillover effects. 1 The second channel is parental interactions. While Sociology presents a useful guide, observational studies in the other sciences have also shown the import of this channel.…”

“…Control Treated , we investigate whether children of different races (or gender) benefit differently from spillover effects. We do so by estimating equation (1), separately by race and gender.…”

“…In Tables D.3 and D.4, we perform a similar exercise with the sample we use in our individualfixed effects analysis. We start with a stripped-down specification in column (1), which includes no controls, and we gradually add controls as we move to column (6), which includes block-group fixed effects, time fixed effects, cohort fixed effects, race fixed effects and gender fixed effects. In column 7, we present the estimated effects from our fixed effects model for the same sample.…”

Parental Paternalism and Patience

“…Second, there is a small empirical literature examining parents' paternalistic behavior towards their children. For instance, there is evidence that imposing limits on children's leisure activities (Cosconati, 2012) and restricting children's choices of friends (Agostinelli et al, 2020) impacts human capital formation. Closely related to our study, Tungodden (2019) investigates parents' paternalistic preferences in the context of their children's competitiveness.…”