Essays in skill development and peer effects

Özdemir, Yasemin

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URN: urn:nbn:de:bsz:180-madoc-560772
Document Type: Doctoral dissertation
Year of publication: 2020
Place of publication: Mannheim
University: Universität Mannheim
Evaluator: Krebs, Tom
Date of oral examination: 13 August 2020
Publication language: English
Institution: School of Law and Economics > VWL, insbes. Makroökonomik u. Wirtschaftspolitik (Krebs)
Subject: 330 Economics
Keywords (English): Peer Effects , Parental Investment , Non-cognitive Skills , Socio-emotional Skills , Fertility
Abstract: This dissertation consists of three self-contained chapters. The underlying themes are the determinants of skill development and the role of social influence on individual decisions. The people that surround us, independent of whether we chose them or interact with them by chance, have a great influence on our decisions. The existence and impact of peer influences have been documented in various areas. At the same time, it has been shown in different ways, how important parental investment and the environment an individual grows up in is for human capital development. In Chapter 1, I combine the two main topics and show how parental investment depends on the social interactions of their child. Chapter 2 investigates the long-run consequences of shocks on the socio-emotional development during adolescence and documents gender differences. In Chapter 3, we underline the importance of social interactions in the decision when to enter parenthood and provide insight on potential spillover mechanisms. In chapter 1, I investigate whether and in how far parents adjust their parenting behavior in response to their child's close peers as defined by friendship nominations. I distinguish between two types of parenting behavior: parental investment, in particular quality time, such as help with homework and joint activities, and parenting style (monitoring). I show the extent and means of parents' response to two different skills of peers: first, cognitive skills as measured by peers' scholastic performance, and second, peers' non-cognitive skills as measured by self-esteem. Moreover, comparing constant to time-varying peer groups, I allow parents to react to peer skills and peer characteristics. This chapter contributes to the literature by expanding the focus on how parents respond to the skills, behavior, and characteristics of close peers. Moreover, this study adds to the literature on social interactions, showing how parental behavior might moderate /reinforce the effects of peers, and school-level policy interventions aimed at changing student compositions. The following three main results emerge from my analysis. First, parents compensate for cognitive skill losses of their child's peer by increasing monitoring. I provide evidence that parents consider both cognitive performance and non-cognitive skills of peers in their investment decision. Response patterns indicate that verbal investment and monitoring are perceived as substitutes to peer cognitive skills, and joint activities are seen as complements to the self-esteem of peers. Second, I document gender differences in the response of monitoring. While cognitive skill losses of sons' peers are compensated, for daughters, increased peer self-esteem is reinforced. Overall, adjustments in time investment are mainly driven by parents that have no close relationship with peers' parents and parents that expect their child to attend college. However, results do not differ by parental education. Adjustments in monitoring and verbal investment are mainly driven by children with below-median cognitive skills, suggesting that parents try to prevent negative spillovers on their "at risk child". Third, by exploiting repeated information on friendship nominations, I show that parents take peer characteristics along with peer skills into account. In addition to compensating cognitive skill losses, mothers compensate for decreases in the fraction of white friends, reinforce higher fractions of peers with educated parents. Fathers' response and parental monitoring are mainly driven by changes in peer group characteristics rather than peers' skills. Chapter 2 is joint work Ghazala Azmat and Katja Maria Kaufmann. We analyze the determinants and consequences of socio-emotional development during adolescence. We causally estimate the impact of a large macro shock, the German Reunification, on the socio-emotional development of East-German adolescents, finding substantial negative effects in the short-run. In particular, we document an immediate increase in youths' anger and anxiety by 33 and 36 percent of a standard deviation, respectively, and a decrease of more than 40 percent of a standard deviation in youths' self-confidence. Contrary to the belief that boys are more strongly affected by negative changes in their environment, we show that these effects are similar for male and female youths, and in terms of self-confidence even stronger for girls. Next, we link changes in these socio-emotional dimensions to a wide range of behavioral outcomes and document stark differences by gender. In line with the "fragile males" hypothesis, we find that changes in the socio-emotional development lead to an increase in externalizing behavior, such as physical fighting and destroying property, and behavioral control problems like alcohol and tobacco consumption among boys only. Looking at internalizing behavior, which is often linked to mental-health problems, we find a strong association between changes in socio-emotional development and increased internalizing behavior, but only for girls. Ultimately, however, the effects on longer-run outcomes such as subjective health, well-being, and educational attainment are grave, and similar, for both genders. Our results highlight that even though boys and girls can be affected similarly in terms of their socio-emotional development, these changes translate into different types of behavior. Overall, this suggests that successful policies require careful targeting. Chapter 3 is joint work with Katja Maria Kaufmann. We analyze family peer effects in the adult fertility decision. Using Dutch administrative data, we provide well-identified causal evidence that a sibling's fertility is contagious, for women starting one year and for men, starting two years after a sibling enters parenthood. Specifically, a sibling entering parenthood within the last two years can triple the probability of becoming a mother, and double the probability of becoming a father in any given quarter. Prominent mechanisms of peer effects include, for instance, social learning, or conforming with the norm. We focus on the first child of an individual so that learning from the sibling's (or the sibling's partner's) experience is most pronounced in our analysis. This finding is validated by weaker (in some cases negative) spillovers found for individuals strongly attached to the labor market. In the sense that, for instance, the main breadwinner of the household has to be strategic in decisions affecting their labor supply and is thus less affected by fertility spillovers. Additionally, two sub-mechanisms prevail. First, we document stronger spillovers for siblings of the same gender (men with brothers), and siblings that are close in age (women and siblings up to one year age difference). This result shows in the context of sibling competition that conforming with the sibling is more likely as an underlying mechanism than differentiation from the sibling. Second, we confirm that support provided by the grandmother is a decisive factor. Siblings seem to compete for grand-maternal resources shown by stronger results in case the grandmother is available in terms of time (i.e. not active in the labor market) and geography (i.e. distance in residences). While there is a big literature on peer effects, decisions to enter parenthood have been so far mainly considered in the context of teen fertility. Our results contribute to the literature by highlighting that social influences within the family are non-negligible in the fertility decision and could be an influential mediator of policy interventions.

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