The Consequences of the COVID-19 Job Losses: Who Will Suffer Most and by How Much?

This paper investigates whether and how parents adjust their parenting behavior in response to their children's peers. In particular, I analyze whether changes in cognitive and non-cognitive skills of children's friends lead parents to adjust their investment and parenting style such, as monitoring and quality time spend with their children. Data from Add Health allow me to follow five cohorts of teenagers from grades 7 to 12 with repeated information on individual friendship networks. Combining the empirical strategy of overlapping peer groups and first-differencing, I estimate a simultaneous system of skill and investment equations. First, I show that parental monitoring increases as the level of cognitive skills among peers decreases. Also, mothers compensate decreases in cognitive skills of their child's peers by increasing verbal investment, while fathers reinforce higher non-cognitive skills of their child's peers with joint activities. Second, I document gender differences in monitoring, where cognitive skills of sons' peers are compensated but non-cognitive skills of daughters' peers are reinforced. Overall, effects in time investment are driven by parents with high educational expectations of their child, and parents that have no close relationship with peer-parents. Third, parental response to peers is not limited to peer skills, the composition of peers as measured by their characteristics also leads to an adjustment in the parenting behavior.