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

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  • 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.

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Bibliographic Info

Paper provided by Society for Economic Dynamics in its series 2004 Meeting Papers with number 129.

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Date of creation: 2004
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Handle: RePEc:red:sed004:129

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Postal: Society for Economic Dynamics Christian Zimmermann Economic Research Federal Reserve Bank of St. Louis PO Box 442 St. Louis MO 63166-0442 USA
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Web page: http://www.EconomicDynamics.org/society.htm
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Related research

Keywords: education; human capital; credit constraints; parental transfers;

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Cited by:
  1. Cunha, Flavio & Heckman, James J. & Lochner, Lance, 2006. "Interpreting the Evidence on Life Cycle Skill Formation," Handbook of the Economics of Education, Elsevier, Elsevier.
  2. Elizabeth M. Caucutt & Lance Lochner, 2005. "Borrowing constraints on families with young children," Proceedings, Federal Reserve Bank of Cleveland, Federal Reserve Bank of Cleveland, pages 39-48.
  3. Flavio Cunha & James Heckman, 2007. "The Technology of Skill Formation," NBER Working Papers 12840, National Bureau of Economic Research, Inc.
  4. Maria Humlum, 2011. "Timing of family income, borrowing constraints, and child achievement," Journal of Population Economics, Springer, Springer, vol. 24(3), pages 979-1004, July.
  5. Adda, Jérôme & Björklund, Anders & Holmlund, Helena, 2011. "The Role of Mothers and Fathers in Providing Skills: Evidence from Parental Deaths," IZA Discussion Papers 5425, Institute for the Study of Labor (IZA).
  6. Angus Armstrong, 2010. "Belief in a Just World and Children's Test Scores," Working Papers, Human Capital and Economic Opportunity Working Group 2011-005, Human Capital and Economic Opportunity Working Group.
  7. 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.
  8. Lance Lochner & Alexander Monge-Naranjo, 2011. "Credit Constraints in Education," Working Papers, Human Capital and Economic Opportunity Working Group 2011-036, Human Capital and Economic Opportunity Working Group.

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