| Summary: | This paper develops and tests a model of parental punishment and child development that emphasizes the role of punishment as a communication channel from the parent to the child. The model mechanism is verified using an experimental data and tested using an observational data. In the model, the parent knows the long-run returns to the child's human capital. The child uses the parent's investment and punishment as noisy signals of the optimal level of effort. By using punishment consistently in response to the child's behavior, the child can be persuaded to behave optimally even in the absence of parental supervision, leading to long-run improvement in outcomes. Consistency of punishment depends on the parent's skill in managing parent-child interaction as the parent attempts to communicate to the child through punishment. The model implies that increasing the parent's skill in implementing punishment consistently can improve child development. Experimental evidence from Germany shows that improving the parent's skill can be achieved by education and training program, leading to better behavior of children as late as ten years after the program. Additional model implications are tested using nationally representative data from the US, showing that punishment can predict either better or worse child development and outcomes depending on how consistently it was implemented in response to child behavior.
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