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Credit Constraints in Education

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  • Lance Lochner

    ()
    (University of Western Ontario)

  • Alexander Monge-Naranjo

    ()
    (University of Pennsylvania)

Abstract

We review studies of the impact of credit constraints on the accumulation of human capital. Evidence suggests that credit constraints are increasingly important for schooling and other aspects of households' behavior. We highlight the importance of early childhood investments, since their response largely determines the impact of credit constraints on the overall lifetime acquisition of human capital. We also review the intergenerational literature and examine the macroeconomic impacts of credit constraints on social mobility and the income distribution. A common limitation across all areas of the human capital literature is the imposition of ad hoc constraints on credit. We propose a more careful treatment of the structure of government student loan programs as well as the incentive problems underlying private credit. We show that endogenizing constraints on credit for human capital helps explain observed borrowing, schooling, and default patterns and offers new insights about the design of government policy.

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File Function: First version, August 16, 2011
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Bibliographic Info

Paper provided by Human Capital and Economic Opportunity Working Group in its series Working Papers with number 2011-036.

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Date of creation: Aug 2011
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Publication status: Forthcoming in Annual Review of Economics
Handle: RePEc:hka:wpaper:2011-036

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Keywords: Human Capital; Incentive Problems; Government Loans; Early Investments; Social Mobility;

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References

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Citations

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Cited by:
  1. Carlo Alcaraz & Daniel Chiquiar & María José Orraca & Alejandrina Salcedo, 2012. "The Effect of Publicly Provided Health Insurance on Academic Performance in Mexico," Working Papers 2012-10, Banco de México.
  2. James J. Heckman & Stefano Mosso, 2014. "The Economics of Human Development and Social Mobility," Working Papers 2014-004, Human Capital and Economic Opportunity Working Group.
  3. Krueger, Dirk & Ludwig, Alexander, 2013. "Optimal Progressive Taxation and Education Subsidies in a Model of Endogenous Human Capital Formation," MEA discussion paper series 13267, Munich Center for the Economics of Aging (MEA) at the Max Planck Institute for Social Law and Social Policy.
  4. Giorgio Brunello & Guglielmo Weber & Christoph Weiss, 2012. "Books are forever: Early life conditions, education and lifetime earnings in Europe," ISER Discussion Paper 0842, Institute of Social and Economic Research, Osaka University.
  5. Scott-Clayton, Judith, 2012. "What Explains Trends In Labor Supply Among U.S. Undergraduates?," National Tax Journal, National Tax Association, vol. 65(1), pages 181-210, March.
  6. Lance Lochner & Todd Stinebrickner & Utku Suleymanoglu, 2013. "The Importance of Financial Resources for Student Loan Repayment," NBER Working Papers 19716, National Bureau of Economic Research, Inc.
  7. Gary-Bobo, Robert J. & Trannoy, Alain, 2013. "Optimal Student Loans and Graduate Tax under Moral Hazard and Adverse Selection," CEPR Discussion Papers 9505, C.E.P.R. Discussion Papers.
  8. Jing You & Samuel Annim, 2013. "The impact of microcredit on child education: quasi-experimental evidence from rural China," Brooks World Poverty Institute Working Paper Series 18313, BWPI, The University of Manchester.
  9. MORIKAWA Masayuki, 2013. "Postgraduate Education, Labor Participation, and Wages: An empirical analysis using micro data from Japan," Discussion papers 13065, Research Institute of Economy, Trade and Industry (RIETI).
  10. Alberto Tumino, 2013. "The effect of local labour market conditions on educational choices: a cross country comparison," ImPRovE Working Papers 13/06, Herman Deleeck Centre for Social Policy, University of Antwerp.
  11. Brunello, Giorgio & Weber, Guglielmo & Weiss, Christoph T., 2012. "Books Are Forever: Early Life Conditions, Education and Lifetime Income," IZA Discussion Papers 6386, Institute for the Study of Labor (IZA).
  12. repec:hka:wpaper:2013-20 is not listed on IDEAS
  13. Judith Scott-Clayton, 2012. "Information Constraints and Financial Aid Policy," NBER Working Papers 17811, National Bureau of Economic Research, Inc.

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