The Power of Neighbourhood: How Social Interactions Shape Household Technical Efficiency in Fostering Children’s Scholastic Achievement

This paper examines the impact of neighbourhood social interactions on a household’s ability to produce their child’s scholastic achievement. A time-varying stochastic frontier model and a spatial Durbin model are used to estimate endogenous and contextual neighbourhood effects on household technical efficiency (TE) levels. The study utilises a geocoded panel of 640 families from the NICHD Study of Early Child Care and Youth Development, spanning the years 1998–2006. Results show that households have an average TE of 53%, suggesting substantial inefficiency. There is also significant spatial interdependence in TE levels among neighbouring households. Parent education, age, child gender, and other demographic characteristics have substantial direct and indirect effects on household TE. These findings highlight the importance of considering social context when developing policies to influence parenting and child development through neighbourhood change.