Parent-Child Information Frictions and Human Capital Investment: Evidence from a Field Experiment

This paper studies information frictions between parents and their children and how these affect human capital investments. A random sample of parents was provided detailed, biweekly information about their child’s missed assignments and grades. I find parents have upwardly-biased beliefs about their child’s effort; providing additional information attenuates this bias and improves student achievement. Using data from the experiment, I estimate a persuasion or signaling game between parents and their children that shows the treatment effect is due to a combination of more accurate beliefs and reduced monitoring costs. The experimental results and simulations from the model demonstrate that improving the quality of school reporting or providing frequent information to parents about their child’s effort in school can produce gains in achievement at a low cost. JEL Codes: I20, I21, I24.