How do parents perceive the returns to parenting styles and neighborhoods?

This paper studies parental beliefs about the returns to two factors affecting the development and long-term outcomes of children: (i) parenting styles defined by warmth and control parents employ in raising children, and (ii) neighborhood quality. Based on a representative sample of 2,119 parents in the United States, I show that parents perceive large returns to the warmth dimension of parenting as well as neighborhood quality, and document that they perceive parenting to compensate for the lack of a good environment. I introduce a measurement error correction to show that perceived returns relate to parents’ actual parenting behavior and families’ neighborhood choices, but document that beliefs are unlikely to explain existing socioeconomic differences.