Credit and Insurance for Human Capital Investments
AbstractStudent loan debt in the US stands at roughly $1 trillion, exceeding credit card debt. In recent years, private lending for undergraduates has skyrocketed to account for roughly 20% of all student loan dollars disbursed. At the same time, youth from low-income families are significantly less likely to attend college relative to their higher-income counterparts. This paper examines the nature of credit for education in the presence of uncertainty and problems of limited commitment by borrowers, moral hazard, and adverse selection. Efficient lending contracts, combined with insurance against adverse labor market outcomes, are considered in a variety of economic environments. We examine the importance of different incentive problems in US data to aid in the design of improved credit and insurance for human capital investment.
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Bibliographic InfoPaper provided by Society for Economic Dynamics in its series 2012 Meeting Papers with number 299.
Date of creation: 2012
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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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This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-01-19 (All new papers)
- NEP-CTA-2013-01-19 (Contract Theory & Applications)
- NEP-EDU-2013-01-19 (Education)
- NEP-IAS-2013-01-19 (Insurance Economics)
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- Lance Lochner & Alexander Monge-Naranjo, 2012.
"Credit Constraints in Education,"
Annual Review of Economics,
Annual Reviews, vol. 4(1), pages 225-256, 07.
- 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.
- Lance Lochner & Alexander Monge-Naranjo, 2011. "Credit Constraints in Education," NBER Working Papers 17435, National Bureau of Economic Research, Inc.
- Lance Lochner & Alexander Monge-Naranjo, 2011. "Credit Constraints in Education," Working Papers 2011-036, Human Capital and Economic Opportunity Working Group.
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