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Borrowing Constraints, College Aid, and Intergenerational Mobility

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  • Hanushek, Eric
  • Leung, Charles Ka Yui
  • Yilmaz, Kuzey

Abstract

This paper provides a consistent comparison of general tuition subsidies, need-based student aid, merit-based student aid, and income continent loans (ICL). Each of these policies is analyzed through a dynamic general equilibrium model in which individuals differ in family wealth and opportunities of completing college. The overlapping generation structure of the model permits evaluation of different aid schemes in their implications on the aggregate outcomes, income distribution and intergenerational mobility. Compared to current U.S. tuition and loan policies, the ICL and need-based policies are most effective in promoting the aggregate efficiency and income equality, while merit-based policies are least effective.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 54238.

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Date of creation: Mar 2014
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Handle: RePEc:pra:mprapa:54238

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Keywords: need-based student aid; merit-based student aid; income contingent loan; efficiency-equality tradeoff; intergenerational mobility;

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References

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  1. Holger Sieg & Dennis Epple & Richard Romano, 2003. "Peer effects, financial aid and selection of students into colleges and universities: an empirical analysis," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 18(5), pages 501-525.
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  10. Eric Hanushek & Charles Ka Yui Leung & Kuzey Yilmaz, 2001. "Redistribution through Education and Other Transfer Mechanisms," NBER Working Papers 8588, National Bureau of Economic Research, Inc.
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Citations

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Cited by:
  1. Flavio Cunha & James J. Heckman & Lance Lochner & Dimitriy V. Masterov, 2005. "Interpreting the Evidence on Life Cycle Skill Formation," NBER Working Papers 11331, National Bureau of Economic Research, Inc.
  2. Jorge Soares, 2008. "Borrowing Constraints, Parental Altruism and Welfare," Working Papers 08-12, University of Delaware, Department of Economics.
  3. Oguro, Kazumasa & Oshio, Takashi & Takahata, Junichiro, 2010. "Ability transmission, endogenous fertility, and educational subsidy," PIE/CIS Discussion Paper 482, Center for Intergenerational Studies, Institute of Economic Research, Hitotsubashi University.
  4. repec:ebl:ecbull:v:15:y:2005:i:11:p:1-9 is not listed on IDEAS
  5. Chapman, Bruce, 2006. "Income Contingent Loans for Higher Education: International Reforms," Handbook of the Economics of Education, Elsevier.
  6. Charles Ka Yui Leung & Nan-Kuang Chen, 2005. "Intrinsic Cycles of Land Price: A Simple Model," Discussion Papers 00005, Chinese University of Hong Kong, Department of Economics.
  7. Laura Romero, 2005. "On the role of borrowing constraints in public and private universities' choices," Economics Bulletin, AccessEcon, vol. 9(6), pages 1-8.
  8. Hanushek, Eric & Charles Ka Yui Leung & Kuzey Yilmaz, 2002. "Redistribution through Education and Other Transfer Mechanisms," Royal Economic Society Annual Conference 2002 94, Royal Economic Society.
  9. repec:ebl:ecbull:v:9:y:2005:i:6:p:1-8 is not listed on IDEAS
  10. Kuzey Yilmaz, 2014. "On the Importance of Fertility Behavior in School Finance Policy Design," Koç University-TUSIAD Economic Research Forum Working Papers 1403, Koc University-TUSIAD Economic Research Forum.
  11. Christoph Winter, 2009. "Accounting for the changing role of family income in determining college entry," IEW - Working Papers 402, Institute for Empirical Research in Economics - University of Zurich, revised Dec 2011.

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