Child Development, Parental Investments, and Social Capital

This paper examines the impact of social capital on child development. Social capital reflects neighborhood connectedness and neighbors’ engagement in child support and monitoring. I measure social capital using a novel neighborhood survey from the Project on Human Development in Chicago Neighborhoods with a latent factor model. To study the roles of social capital and parental investments in skill development within a unified framework, I estimate a dynamic skill production function for children aged 6-15. Leveraging a natural experiment from the Chicago public housing demolition, I find that social capital is important for both cognitive and socio-emotional skills. In contrast, parental investments are effective only for cognitive skills during these ages. Counterfactual experiments suggest that increasing social capital levels in low socioeconomic-status (SES) neighborhoods to match those in high-SES neighborhoods could reduce the cognitive skill gap by 25% and the socio-emotional skill gap by 80%.