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How Economics Affects Parenting Styles

Matthias Doepke, Fabrizio Zilibotti, How Economics Affects Parenting

With Matthias Doepke Professor of Economics at Northwestern University and Fabrizio Zilibotti Professor of Economics at Yale University, Co-Authors of Love, Money, and Parenting: How Economics Explains the Way We Raise Our Kids

To learn about the reasons behind different parenting styles worldwide, Steve sat down with Matthias Doepke, Professor of Economics at Northwestern University, and Fabrizio Zilibotti, Professor of Economics at Yale University – co-authors of the book, “Love, Money, and Parenting: How Economics Explains the Way We Raise Our Kids”.

How Economics Affects Parenting Styles

The basic finding of Doepke and Zilibotti’s studies is that parenting styles or attitudes toward parenting tend to vary based on how much economic inequality exists in a country. In countries, such as the United States, where there is a huge gap between the richest and the poorest, there tends to be more “helicopter parenting” – parents extremely involved in their child’s education and in pushing them forward – at least in the higher economic strata.

Unfortunately, what tends to happen with parents in the lower economic levels is that they often give up, feeling that they can’t compete with more economically well-off parents. For example, wealthier parents can not only afford to send their children to better schools, but they can provide them with better equipment and more extra-curricular activities and training. They’re also often more available for “hands-on” parenting, as opposed to poorer parents whose time may be almost exclusively dedicated to work.

A More Relaxed Parenting Style

The professors found a more relaxed parenting style in some European countries, such as Sweden and Germany. This more relaxed parenting style appears to be associated with two things: one, an economy where there is more income equality, and two, situations where there is less disparity among schools—that is, where schools are generally more homogenous in terms of quality.

Of course, all parents want their children to be successful and happy. But there is inevitably a trade-off in terms of pushing children toward maximum achievement in school and obtaining maximum income in the workplace versus giving them more freedom to discover and pursue their own interests.

Steve brought up the recent scandals involving parents paying for access to Ivy League schools. Professor Doepke noted that one might think that parents who can already give their children every advantage would be more relaxed and less inclined to go to such extremes, but the fact is that the higher up you go in society, the more competitive and anxious parents seem to feel.

Parenting In China

In China, parents tend to be more like those in the U.S. and the U.K. in terms of being very involved and pushing their children to excel. But there’s a different emphasis. Rather than having more of a focus on extra-curricular activities and possibly impressing an admissions officer at a university, Chinese parents focus more on preparing children to perform well on certain exams (the most important one being the GaoKao) that determine admission to the university system. Universities in China are strictly ranked, therefore gaining admission to one over the other can be life-changing. Furthermore, 90% of Chinese parents believe that teaching children to work hard is the most important aspect of parenting.

Aiming For The “Best” Outcome

The competitive, overly involved style of parenting is most associated with countries where there is greater economic success, such as a higher GDP. However, it’s not clear that pushing for maximum performance in school is necessarily the best thing for an economy because  society also needs people to be creative and innovative. Professor Doepke pointed out that many of the most successful entrepreneurs are actually people who dropped out of school. He also noted that Sweden, one of the countries on the low side of having pushy parents, is also the source of a lot of technological innovation.

Steve asked the authors for suggestions in terms of how public policy might help overcome what they referred to as the “parenting trap”, where lower-income parents and their children get caught up in a self-reinforcing cycle of poverty and under-performance. The first suggestion they offered is encouraging an educational system that is less focused on high-stakes exams and that offers more equal access. Professor Zilibotti referred to states such as California where there is an extensive state university system, as opposed to those with just a few state universities. Improving early childhood education may also help to even out the playing field. A lot of the parenting gaps seem to arise very early in life, and countries that have a universal system of high-quality early childhood education appear to do a better job of leveling out differences from the beginning.

To learn more about various parenting styles and the findings of Doepke and Zilibotti, check out their book, “Love, Money, and Parenting”.

Disclosure: The opinions expressed are those of the interviewee and not necessarily United Capital.  Interviewee is not a representative of United Capital. Investing involves risk and investors should carefully consider their own investment objectives and never rely on any single chart, graph or marketing piece to make decisions.  Content provided is intended for informational purposes only, is not a recommendation to buy or sell any securities, and should not be considered tax, legal, investment advice. Please contact your tax, legal, financial professional with questions about your specific needs and circumstances.  The information contained herein was obtained from sources believed to be reliable, however their accuracy and completeness cannot be guaranteed. All data are driven from publicly available information and has not been independently verified by United Capital.

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Steve Pomeranz: You know, we’ve all noticed it. We’ve all noticed that the pace of parenting, the business of parenting, if you will, has changed. Used to be in western countries, parenting was a relaxed affair. I know when I was growing up, I was really not overseen all that much. However, it was permissive, and yet it was directed. Now it seems to no longer be the case.

We have helicopter parenting, and perhaps frantic and over-scheduled children. We’ve all seen this, and we’ve all heard about this as well. Well, how did it all come about? The answers interestingly come from an unlikely place, the study of economics. To get into why economics may be used to explain what is going on, I have invited the authors of a new book, Love Money and Parenting: How Economics Explains the Way We Raise Our Kids.

With me are two authors, Matthias Doepke, Professor of Economics at Northwestern University and Fabrizio Zilibotti, Professor of Economics at Yale University. Welcome, gentlemen.

Matthias Doepke: Thanks for having us on.

Fabrizio Zilibotti: Thanks for having us.

Steve Pomeranz: It’s my pleasure. Matthias, you’re currently speaking to us from Manheim, Germany, and Fabrizio, you are in Switzerland. So what time is it in Switzerland right now?

Fabrizio Zilibotti: It’s about 4:30.

Steve Pomeranz: Oh, okay. So the same for both of you. All right, well let’s get started. Matthias, take us on a brief history tour of parenting amongst different countries and different societies and some of the forces at work.

Matthias Doepke: Right. So it has changed quite a bit. If you go back far enough in history, parenting used to be what we now authoritarian. There was an expectation that parents will be firm, often used corporal punishment, and really make sure the kids follow exactly what they think is the right way to parent. You can see this in different societies. You can also see it in writings. When you think, for example, what the Bible has to say about parenting, it very much endorses the view that parents should hit their children to put them on the right path.

So we come from a place of very, you might say, aggressive parenting, then over time, for at least some period, this has loosened and has become more permissive. So there were some changes in how we think about a child, in general, and about children starting in the 18th and 19th centuries. This has really led over time to more [inaudible] parenting, really culminating in this period of fairly loose parenting when you grew up, and when I also child too. So both Fabrizio and I had this experience of a fairly relaxed childhood with parents giving us food and shelter and some guidance, but not really supervising us all that much. We had a lot of freedom when we were children in the ’60s, ’70s, and ’80s. But since then-

Steve Pomeranz: Well, all of that’s changed now as you said. We have this kind of helicopter parenting. Not too long ago I read about parenting, curling parenting. Have you guys heard about curling parenting?

Matthias Doepke: An even newer development referring to this Olympic sport, the Winter Olympic sport of curling, where you have this broom to move any obstacle out of the course of your child. Exactly, yes.

Steve Pomeranz: I know. Sweep away all obstacles.

Fabrizio Zilibotti: No blowing.

Steve Pomeranz: Pardon me?

Fabrizio Zilibotti: And snowplowing parents.

Matthias Doepke: The snowplow parents [crosstalk 00:03:28]

Steve Pomeranz: Snowplow parents. Yes. All right, well, all of these parenting styles, I know this, spare the rod spoil the child, was a famous saying for authoritarian parents. And you have these different styles in these different times during civilization, but also in different countries and their cultures. What do you think accounts for the difference between the parenting styles, let’s say in the modern culture? You may still have authoritarian or permissive, and yet it’s in the modern times, and yet it’s different from country to country. How do you account for that?

Matthias Doepke: It has gotten more intense.

Fabrizio Zilibotti: It’s a… Of course, you find different type of parents within the same countries, but the prevalence of the different type of parents changes a lot. You know, my own experience is that my daughter was born in Sweden, then we moved to Switzerland. We have spent time in the UK, then I moved to the United States. So, I’ve even seen this directly. And the culture is very different. What we argue in the book is not just culture. So it’s somehow the system of incentive the parents face is very different.

Start with Sweden where my daughter was born, well, parents are extremely relaxed. They are very involved to be clear, but at the same time, there are not big tasks along the way. There are not situations in which you have to get your children to the best schools because schools are quite homogenous in quality, and also there’s not a huge deal of economic inequality in the first place.

So in the end, where you end up in society, well, of course, it’s better to end up in the higher than the lower part, but it’s not so extreme as you have in places like the United Kingdom or United States, where it’s so important, and certainly is perceived to be so important in what type of schools children get admitted, and everything is somehow projected towards the future. And in the end, society doesn’t offer so many parachutes for those who fail.

So what we document in our study is that there is a significant relationship between the level of economic inequality that you have in different counties and the type of parenting style that prevails. Where in countries like Sweden, our Scandinavian countries, or Germany where inequality is low, your parents are more relaxed, and countries like the United States or China even more, where it’s a lot of inequality, and the school admission is more important, then you have parents very stressed.

Steve Pomeranz: Now this is not a book judging the way people raise their children. I noticed that when I read it. It’s more about looking across the different societies and trying to understand the differences and the reasons for these differences. So I know that you talk about or you write about the fact, and you just mentioned it, of the inequality being an important economic driver in how parents are raising their children. Why, in more competitive societies, is there more of this helicopter parenting? Why is there more inequality than in societies where these countries still have to compete in a very competitive world, and yet they don’t seem to have the inequalities?

Matthias Doepke: Right. And it’s an interesting point that you have so much variety in approach to parenting, but we are arguing that at the end of the day all these parents have tried to do the same thing, namely to ensure that the children do well. What we’re arguing is what the economic conditions affect, it’s what it really means to do well.

And so as economists, we’d like to think about tradeoffs. For example, the tradeoff here in parenting between giving freedom to children and letting them have their own space to discover, maybe their own interests, which is valuable, but also the value of really trying to maximize your potential. Say in school achievement, and going as far as you can, say in terms of income, in terms of getting the best paying job that you can find.

So all of these things are important to all parents to some extent. But what we argue is the place where the economy matters is how you rate these different objectives. So if you’re in a place like the United States right now where inequality is high, the measures of success based on performance in school and based on achievement and careers, these matters become more important. The parents could be more focused on really pushing their kids ahead. Whereas if inequality is low, you could relax more, and emphasize some of these other also desirable aspects in raising children.

Steve Pomeranz: The fundamental goal, you’re saying, is the same for all parents. And that’s a healthy, happy,  well-acclimated children, who have the best opportunities within the society. It’s just that when there’s less competition, I think this seems to be the same across the board when you’re even talking about resources like food. Things are different when there’s fewer resources than when there’s more resources. One of the features of the book is where you describe this inequality cycle, where those at the top, those with the resources, are able to succeed more and more, and those without the resources are going to continue in this poverty cycle.

Fabrizio Zilibotti: Yes and no. When I was a child, the school system in Italy almost forbade parents from intervening too much. And one reason was precisely that, the more parents get involved, the more inequality that generates. Because some people have parents who have studied, some have parents who are poor, they don’t have much time. So somehow when we have parents who get very involved, that sign up children for expensive extracurricular activities, some sport activity, well, then the social differences become also more important.

And in this sense, there are some barriers that get generated in a society that is very competitive because those who are below, they just cannot compete on equal grounds. So what we argue is we use the notion of parenting the gaps, in the sense that  different social conditions today, matter more for the type of parent-child experience that is dominating. That turning into what we call parenting traps, whereby those who are below in society essentially give up because they find it’s not possible to compete, given all the demands that these types of parenting involve.

Steve Pomeranz: Where do you put the recent scandals at these Ivy League universities where people were paying for access, paying coaches and other things? I mean, it seems to have gotten to an extreme here. Have you seen that in any other countries?

Matthias Doepke: We have not seen that. It’s a really interesting tip of the iceberg phenomenon, where we see this push for high performance and academic accomplishment even from the most well-off parents that you could imagine. Cause you might’ve thought that if you’re already very well placed in society, that made you have less reason to worry. That you might think that my kids will do well no matter what because I can already give them so much more than others. But what’s really interesting about this phenomenon, that the higher you go in society, it becomes almost a more competitive, and almost more anxiety.

And we see this certainly in this scandal, but we see it more broadly in this observation that the upper-middle class has directed, perhaps, the most of these changes. It has had the largest increase in the time they spend, the money they spent on raising their children. Which really shows you that this increasing inequality and the anxiety it generates is a quite pervasive phenomenon.

Steve Pomeranz: Let’s talk about China. Right now, China is in the focus of our government and our country as a major competitor. What is child-rearing like in… You know I recognize that alarm. The ambulance sound. We don’t have that sound here so much. But anyway, let’s look at China in as much as, the way they’re raising their children, and they’re a highly competitive society, similar to ours.

Fabrizio Zilibotti: In the sense of parents are incredibly involved and push very hard, their children succeed in education. I would say it’s less about extra-curricular activities and impressing an admissions officer with very particular characteristics. It’s much more about doing well in some homogenous exams. Who are the most important one being called GaoKao, which is admission to the university system.

The universities are very strictly ranked, so it’s very important for Chinese students to go to a very good university, as opposed to go to an average university. As well, the quality level is much lower. That again in contrast with Europe where university level is quite homogenous across the country. So this results in some incentive, in some respect, mirrors those that we see in the United States. At the same time, the push is much more on working hard, hard, and hard.

So we, in the scale… In one of the parts of the book, we document how parents ask when they answer a question about what is important for children upbringing. And one of the options is hard work. So hard work is in very low esteem among the European parents. Is in high esteem among the Americans, and much more among Chinese. So 90% of Chinese parents think that this is the most important aspect in childrearing. So in a sense, it’s the US in a more extreme version, but also in different forms because the type of hurdles that children have to go through are different.

Steve Pomeranz: Do you see or have you seen a correlation between these attitudes? The, let’s see, the attitude of, “well, we don’t really want you to, we don’t believe in working too hard,” versus, “we believe in hard work,” in the wealth disparity between these countries, the GDPs, and the productivity, and actually power of these countries?

Matthias Doepke: So some of these countries that are emphasizing hard work, like the United States, are very work-oriented and have a very high GDP per capita. For example, a bit higher than many countries in Europe. At the same time, we should not forget that it is not so clear that pushing for the maximum in, say, school or academic performance is really always the best thing for the economy because you also need people to be creative and to have new ideas. And if you think about many of the big entrepreneurs, Steve Jobs is one example. Many of these most important people for the economy actually dropped out of school at some point and pursued their own path, as opposed to just thinking of these conventional measures.

So I think there’s a risk that by being too much about things you can measure, just about math scores and degrees, we maybe lose some room for developing creativity and new ideas. And one interesting example is that Sweden, which is the society that among industrial societies is fairly low on the scale of having pushy parents and doesn’t emphasize this hard work aspect very much, is a very creative society. So a lot of innovation, say in technology, actually comes from Sweden, even though the parenting isn’t as intense.

Fabrizio Zilibotti: Yes. If it were for me, let me step in here. Last month I presented the book in a number of places in China, and there, one of the concerns that people have is that somehow the way children grow up is too mainstream. Now, you could think that given the type of political system they have, that’s also something welcome maybe from the political elite. But at the same time, the challenge now is to have a society that pushes more for innovation. That’s what they explicitly claim. And so there’s this system that is based on a homogenous exam of very core subjects tends to generate students who are very good performers. But at the same time, they are very similar, perhaps too similar, one to another. And that’s an element of debate, but I found people very attentive and very interested.

Steve Pomeranz: The book is Love Money and Parenting: How Economics Explains the Way We Raise our Kids. Matthias Doepke and Fabrizio Zilibotti are my guests. Matthias Doepke is Professor of Economics at Northwestern University and Fabrizio is Professor of Economics at Yale University.

Coming back to the United States here, is there a role for public policy in this area to help escape what you call the parenting trap, that self-enforcing cycle of poverty and under-performance?

Matthias Doepke: So we think there’s an important role for policy because we do see that across the industrialized countries that face very similar overall global economic trends, we do see very different outcomes. We have already mentioned the example of Scandinavia. There’s also places like the Netherlands, for example, but we also have a lot less of those parenting pressure and arguably better outcomes in, at least some, dimensions. We argue that policy, for example, education policy is quite important for that. Is the education system is structured around high stakes exams? Is college admissions a very competitive process, or is there more equal access across the whole distribution?

One particular aspect is also very important is early childhood education. Now we see that a lot of the parenting gaps that we observe across kids from different parts of the distribution arise very early life. And you’ll see that countries like Scandinavia, like the Netherlands, do have a universal system of high-quality early childhood education, which levels out some of those differences before kids even enter into school. And so this gives us some dimensions to think about, how some of these developments could be counteracted in the United States as well.

Fabrizio Zilibotti: Yeah, if I may say something, the state university is also an important instrument. If I think of California, for instance, that has implemented a very successful system of a state university, which means not just a one or two or even 10 institutions, the larger set of places that provide high education and also good access. That can certainly help making this race less competitive and less tough.

Steve Pomeranz: What about areas of the country in the United States? Are there cultural differences in parenting style there that you’ve noticed?

Matthias Doepke: So we haven’t looked so far at regional data. You would think they do exist because the education systems are quite different. You will see, for example, if you compare, say New York City or Los Angeles, so big cities with a lot of inequality between private schools and public schools, to say suburban areas where there is a bit more equality, and the quality of schooling that’s available.

So even in my own life when we moved from Los Angeles, where I was at UCLA to Chicago suburbs, in part, because in Los Angeles many parents feel that it’s a difficult choice between the public school system that doesn’t always do so well and private schools that are very economically exclusive and also maybe provide an environment that is not ideal in every dimension for your kids. Compared to places where there’s more high-quality public schooling available, and so some of these choices are less stark.

Steve Pomeranz: All right gentlemen, I have a final question for you, and we don’t have much time. But I also don’t want to ask this question, but I’m going to ask it anyway. And this is the question, where are children happiest? I hate that question. Because you hear about these happiness surveys that are done. So based on your research, tell us where the children are happiest, and, I guess, where they’re unhappiest as well.

Fabrizio Zilibotti: Well, I think that some European countries strike a good balance. Now, there are even some ranking out there—UNICEF has produced one—and you could say that the children in Sweden or in the Netherlands enjoy a more relaxed and happier life. It could be that that comes through the expense of some healthy type of pressure that could do something later in life. But I think that part of this race is wasteful. So I think that if we managed to have all parents scaled down to some extent, the effort in making their children look like the best, that would come in favor of a better family life and also in having children who are less stressed. So I don’t want to grow a strong conclusion of the type of, Sweden is better than the United States, but I think that there is to some extent, an excessive competitive pressure, that can and should perhaps, be reduced. Matthias.

Steve Pomeranz: Matthias last words.

Matthias Doepke: I agree with this, and to some extent, based on own experience. That we started from this position that we really enjoyed our own childhood, we sometimes feel our own kids don’t have the same freedom to just be themselves. And so, I definitely agree with the more relaxed model being an attractive one.

Steve Pomeranz: And if you’re wondering what your parenting style is, there is a link that we will provide on our website to point you to that. It’s entitled, “What is Your Parenting Style?” And so come to our website. My guests, Love Money and Parenting, the authors of this book, Love Money and Parenting: How Economics Explains the Way We Raise our Kids. Matthias Doepke and Fabrizio Zilibotti are the authors. And to hear this in any interview, again, if you have any question about what we’ve just discussed, we love to get your questions. So visit our website, stevepomeranz.com to join the conversation.

While you’re there, sign up for our weekly update, we’re in your mailbox every single week, you’ll get the entire show. You can listen to one segment. You can read the segment, you can see the transcripts, or you can listen to the entire show at your convenience. That’s stevepomeranz.com. Gentlemen, thank you so much for joining me today.

Matthias Doepke: Thanks for having us on.

Fabrizio Zilibotti: Thank you.