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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
Date of revision:
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. Lance Lochner & Alexander Monge-Naranjo, 2012. "Credit Constraints in Education," University of Western Ontario, CIBC Centre for Human Capital and Productivity Working Papers 20121, University of Western Ontario, CIBC Centre for Human Capital and Productivity.
  2. Angus Armstrong, 2010. "Belief in a Just World and Children's Test Scores," Working Papers 2011-005, Human Capital and Economic Opportunity Working Group.
  3. Maria Humlum, 2011. "Timing of family income, borrowing constraints, and child achievement," Journal of Population Economics, Springer, vol. 24(3), pages 979-1004, July.
  4. Cunha, Flavio & Heckman, James J. & Lochner, Lance & Masterov, Dimitriy V., 2005. "Interpreting the Evidence on Life Cycle Skill Formation," IZA Discussion Papers 1675, Institute for the Study of Labor (IZA).
  5. Jerome Adda & Anders Bjorklund & Helena Holmlund, 2011. "The Role of Mothers and Fathers in Providing Skills: Evidence from Parental Deaths," Economics Working Papers ECO2011/08, European University Institute.
  6. Elizabeth M. Caucutt & Lance Lochner, 2005. "Borrowing constraints on families with young children," Proceedings, Federal Reserve Bank of Cleveland, pages 39-48.
  7. James Heckman & Flavio Cunha, 2007. "The Technology of Skill Formation," American Economic Review, American Economic Association, vol. 97(2), pages 31-47, May.
  8. 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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