A Dynamic Model of the Economic Returns to Adolescent Social Skills

Zach Weingarten (), Jere R. Behrman () and Andrew Postlewaite ()
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Zach Weingarten: University of Pennsylvania
Jere R. Behrman: University of Pennsylvania
Andrew Postlewaite: University of Pennsylvania

PIER Working Paper Archive from Penn Institute for Economic Research, Department of Economics, University of Pennsylvania

Abstract: Social-skill formation during adolescence depends on peer environments, but those environments are equilibrium outcomes shaped by individual choices. To account for this endogeneity, we develop and estimate a dynamic model in which parents invest in adolescents, adolescents choose whether to participate in social activities (athletics and extracurricular clubs), and these choices jointly determine the neighborhood-peer environment that influences the accumulation of social skills, cognitive skills, and mental health. The model matches empirical patterns of skill accumulation, parental investment, and activity participation among U.S. adolescents, and links terminal adolescent-skill stocks to adult educational attainment and labor-market outcomes. In policy counterfactuals, subsidizing parental investment generates large gains in college completion and earnings, and subsidizing club participation generates larger long-run gains than subsidizing athletic participation. We also find that a counterfactual that eliminates peer effects reduces athletic and club participation by 15 and 9 percentage points, terminal adolescent social and cognitive skills by 0.05–0.08 standard deviations, college completion by 3%, and adult income by nearly 1%.

Keywords: social skills; skill formation; peer effects; parental investments; adolescent development; athletics; clubs (search for similar items in EconPapers)
JEL-codes: I24 J24 (search for similar items in EconPapers)
Pages: 76 pages
Date: 2026
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