Peer and parental influence in the development of cognitive skills and predispostion to risky behaviour

Abstract

This paper analyzes the strategic interactions between peers and parents in the development of adolescent’s cognitive skills and non-cognitive skills, as proxied by the predisposition to use substances. We estimate a technology of skill formation that identifies peer effects on the basis of quasi-random assignment of students across classes, time varying data, and the use of instrumental variables. We find that both peer and parental socialization efforts have a positive influence over adolescents’ academic skills, and that these effects are complementary: as peers get better academically, parents invest more. We do not find, however, linear-in-means peer or parental effects on the predisposition to use substances.