Jiemin Xu

Abstract: This paper studies children as active decision-makers in their own skill development during adolescence and analyzes how parents influence children’s choices through strategic interaction. Using unique panel data on intra-household interactions from South Korea, I investigate a non-pecuniary and indirect form of parental involvement in education - parents’ discussions about performance with children. Exploiting within-individual variation, I find that regular parent-child performance discussion increases the child’s time paying attention in class by 13 percentage points. I incorporate this interaction into a dynamic model of skill formation where performance discussion is costly to parents but increases child effort. Parents can enhance skill development through this novel indirect channel in addition to a standard direct channel of educational investment. Shutting down the channel of performance discussion decreases skill accumulation by 0.09 standard deviation in four years, equivalent to a $5,140 reduction in educational investment. By disentangling the determinants of performance discussion, I find that differential costs rather than benefits result in more performance discussion in high-socioeconomic-status households. Eliminating the cost difference slows the expansion of the skill gap between high- and low-socioeconomic groups in adolescence by 7.9 percent.