Peer effects vs. parental influence in the development of capabilities in adolescence

The past decade has witnessed the surge of a large body of research analyzing critical periods for investment in children’s skills. Most of this literature has underscored the importance of parental investments and of preschool education during the early stages of life. Adolescence is another critical period in the formation of skills, where peers have a particularly influential role. In this paper we estimate the role of parents and peers on the development of cognitive and non-cognitive skills using a version of Cunha and Heckman’s (2008) technology of skill formation. Identification of peer effects is based on the quasi-random assignment of students across classes, the dissociation of individual and peer outcomes over time, and the use of instrumental variables to account for common shocks. We find that parents continue to exert a positive impact on their kids during adolescence, promoting academic development and life satisfaction. The influence of parents is, however, stronger in outcomes less likely to be observable and penalized by peers (such as life-satisfaction) and much smaller than the effect of peers in those outcomes subject to peer influence (i.e. academic performance).