Stressful Home Environment and the Child's Socio-Emotional Development

Children's early life socio-emotional skills predict long-run socio-economic outcomes, yet large disparities exist between these skills at early ages. In this paper, we study whether reducing home environmental stressors can reduce these early-life skill disparities, and how this depends on children’s pre-existing socio-emotional skills. To do so, we estimate a dynamic model of socio-emotional skill production that depends on parental investment, including the parent’s mental health and parenting style, and accounts for unobserved heterogeneity in child ability. Using the model, we find that improving sensitive parenting and mothers’ psychological well-being has a larger impact on children who have lower initial levels of socio-emotional skills. We also find that children’s pre-existing skills and parental inputs are substitutes, which has implications for which policies may best address later skill disparities.