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Early and Late Human Capital Investments, Credit Constraints, and the Family

Author

Listed:
  • Elizabeth Caucutt
  • Lance Lochner

Abstract

We develop a lifecycle human capital investment model in an overlapping generations environment. Investments in human capital can be made at different ages and are subject to different constraints on the individual and family. We explore empirical evidence on the complementarity of investments at early and late ages as well as the role of credit constraints in determining these investments. Using calibration and estimation, we parameterize a theoretical model and explore the impacts of various intervention policies, including subsidies and loans for human capital investment at different ages. The results speak to the importance of considering the response of both early and late human capital investments in determining the full response to government policies. They also incorporate substitution and complementarity between parental expenditures and government expenditures on investment in an altruistic family environment. Thus, family and individual decision rules depend on the policy environment.

Suggested Citation

  • Elizabeth Caucutt & Lance Lochner, 2004. "Early and Late Human Capital Investments, Credit Constraints, and the Family," 2004 Meeting Papers 129, Society for Economic Dynamics.
    • Handle: RePEc:red:sed004:129
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    Citations

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    Cited by:

    1. Lance Lochner & Alexander Monge-Naranjo, 2012. "Credit Constraints in Education," Annual Review of Economics, Annual Reviews, vol. 4(1), pages 225-256, July.
    2. Cunha, Flavio & Heckman, James J. & Lochner, Lance, 2006. "Interpreting the Evidence on Life Cycle Skill Formation," Handbook of the Economics of Education, in: Erik Hanushek & F. Welch (ed.), Handbook of the Economics of Education, edition 1, volume 1, chapter 12, pages 697-812, Elsevier.
    3. Christoph Winter, 2014. "Accounting for the Changing Role of Family Income in Determining College Entry," Scandinavian Journal of Economics, Wiley Blackwell, vol. 116(4), pages 909-963, October.
    4. James Heckman & Flavio Cunha, 2007. "The Technology of Skill Formation," American Economic Review, American Economic Association, vol. 97(2), pages 31-47, May.
    5. Maria Humlum, 2011. "Timing of family income, borrowing constraints, and child achievement," Journal of Population Economics, Springer;European Society for Population Economics, vol. 24(3), pages 979-1004, July.
    6. Angus Armstrong, 2010. "Belief in a Just World and Children's Test Scores," Working Papers 2011-005, Human Capital and Economic Opportunity Working Group.
    7. Elizabeth M. Caucutt & Lance Lochner, 2005. "Borrowing constraints on families with young children," Proceedings, Federal Reserve Bank of Cleveland, pages 39-48.
    8. Adda, Jérôme; Björklund, Anders; Holmlund, Helena, 2011. "The Role of Mothers and Fathers in Providing Skills: Evidence from Parental Deaths," Economics Working Papers ECO2011/08, European University Institute.

    More about this item

    Keywords

    education; human capital; credit constraints; parental transfers;
    All these keywords.

    JEL classification:

    • I2 - Health, Education, and Welfare - - Education
    • J2 - Labor and Demographic Economics - - Demand and Supply of Labor

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