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Educational Financing and Lifetime Earnings

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  • Robert M. Sauer

Abstract

This paper formulates and estimates a dynamic programming model of optimal educational financing decisions. The main purpose of the paper is to measure the effect of short-term parental cash transfers, received during school, on educational borrowing and in-school work decisions, and on post-graduation lifetime earnings. The estimated parameters of the model imply that parental cash transfers do not significantly influence post-graduation lifetime earnings. Long-term factors such as family background and prior human capital investments are more important. Parental cash transfers do, however, significantly determine the decision to borrow or work during school and the level of lifetime consumption. Copyright 2004, Wiley-Blackwell.

Suggested Citation

  • Robert M. Sauer, 2004. "Educational Financing and Lifetime Earnings," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 71(4), pages 1189-1216.
    • Handle: RePEc:oup:restud:v:71:y:2004:i:4:p:1189-1216
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    File URL: http://hdl.handle.net/10.1111/0034-6527.00319
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    Citations

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    Cited by:

    1. Christian Belzil, 2008. "Testing the Specification of the Mincer Wage Equation," Annals of Economics and Statistics, GENES, issue 91-92, pages 427-451.
    2. Belzil, Christian & Hansen, Jorgen, 2007. "A structural analysis of the correlated random coefficient wage regression model," Journal of Econometrics, Elsevier, vol. 140(2), pages 827-848, October.
    3. Fossen, Frank M. & Glocker, Daniela, 2017. "Stated and revealed heterogeneous risk preferences in educational choice," European Economic Review, Elsevier, vol. 97(C), pages 1-25.
    4. Belzil, Christian, 2007. "The return to schooling in structural dynamic models: a survey," European Economic Review, Elsevier, vol. 51(5), pages 1059-1105, July.
    5. Belzil, Christian, 2004. "Un modèle économétrique dynamique de l’abandon scolaire au Québec et en Ontario," L'Actualité Economique, Société Canadienne de Science Economique, vol. 80(2), pages 363-381, Juin-Sept.
    6. Brodaty, Thomas & Gary-Bobo, Robert J. & Prieto, Ana, 2014. "Do risk aversion and wages explain educational choices?," Journal of Public Economics, Elsevier, vol. 117(C), pages 125-148.
    7. Meta Brown & John Karl Scholz & Ananth Seshadri, 2012. "A New Test of Borrowing Constraints for Education," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 79(2), pages 511-538.
    8. Seeun Jung, 2015. "Does education affect risk aversion? Evidence from the British education reform," Applied Economics, Taylor & Francis Journals, vol. 47(28), pages 2924-2938, June.
    9. Keane, Michael P. & Todd, Petra E. & Wolpin, Kenneth I., 2011. "The Structural Estimation of Behavioral Models: Discrete Choice Dynamic Programming Methods and Applications," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 4, chapter 4, pages 331-461, Elsevier.
    10. Sebastian Galiani & Juan Pantano, 2021. "Structural Models: Inception and Frontier," NBER Working Papers 28698, National Bureau of Economic Research, Inc.
    11. Kirdar, Murat, 2009. "Source Country Characteristics and Immigrants’ Migration Duration and Saving Decisions," MPRA Paper 13322, University Library of Munich, Germany.
    12. Christian Belzil & Arnaud Maurel & Modibo Sidibé, 2021. "Estimating the Value of Higher Education Financial Aid: Evidence from a Field Experiment," Journal of Labor Economics, University of Chicago Press, vol. 39(2), pages 361-395.
    13. Sunha Myong & Jungho Lee, 2019. "Self-financing, Parental Transfer, and College Education," 2019 Meeting Papers 106, Society for Economic Dynamics.
    14. Seeun Jung, 2014. "Does Education Affect Risk Aversion?: Evidence from the 1973 British Education Reform," Working Papers halshs-00967229, HAL.
    15. Christian Belzil & Jörgen Hansen, 2002. "Earnings Dispersion, Risk Aversion and Education," CIRANO Working Papers 2002s-20, CIRANO.
    16. Sieg, Holger & Wang, Yu, 2018. "The impact of student debt on education, career, and marriage choices of female lawyers," European Economic Review, Elsevier, vol. 109(C), pages 124-147.
    17. Murat G. Kirdar, 2012. "Estimating The Impact Of Immigrants On The Host Country Social Security System When Return Migration Is An Endogenous Choice," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 53(2), pages 453-486, May.
    18. Belzil, Christian, 2004. "On the Specification of Mincerian Wage Regressions with Heterogeneity, Non-Linearity, Non-Separability, and Heteroskedasticity," IZA Discussion Papers 1083, Institute of Labor Economics (IZA).
    19. Frank Fossen & Daniela Glocker, 2011. "Expected future earnings, taxation, and university enrollment," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 18(6), pages 688-723, December.
    20. Cozzi, Guido & Francesconi, Marco & Lundberg, Shelly & Mantovan, Noemi & Sauer, Robert M., 2018. "Advancing the economics of gender: New insights and a roadmap for the future," European Economic Review, Elsevier, vol. 109(C), pages 1-8.
    21. Holger Sieg & Yu Wang, 2017. "The Impact of Student Debt on Education, Career, and Marriage Choices of Female Lawyers," NBER Working Papers 23453, National Bureau of Economic Research, Inc.
    22. Bodvarsson, Orn B. & Walker, Rosemary L., 2004. "Do parental cash transfers weaken performance in college?," Economics of Education Review, Elsevier, vol. 23(5), pages 483-495, October.
    23. Cervantes, Carla Varona & Cooper, Russell, 2022. "Labor market implications of education mismatch," European Economic Review, Elsevier, vol. 148(C).

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