The Economics of Parenting Skill and Child Development

This paper develops and tests a model of parental punishment in the context of parent-child interaction and child development. When the parent has better information than the child about the child's long-run returns to human capital, the child uses the parent's investment and punishment as noisy signals of what his optimal effort should be in both the short run and the long run. Punishment has a negative effect on the child's life cycle outcomes if it is used harshly and inconsistently with respect to child behavior. Conversely, punishment has positive effect on the child's life cycle outcomes if it is used moderately and consistently such that the parent can communicate to the child his optimal level of effort. Parents are heterogeneous in parenting skill, which is their ability to use punishment as a precise signal. The model suggests that punishment by itself can have either a positive or a negative effect on child outcomes, and thus the quality of punishment, not punishment itself, contributes to the child's human capital development. Experimental data from Germany shows that parenting skill can be improved through education and training, with behavioral improvement in the child observed as late as ten years after the intervention. Additionally, evidence from nationally representative data from the United States is consistent with model predictions.