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Credit constraints and human capital policies

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  • Camargo, Braz
  • Stein, Guilherme

Abstract

We develop a model of voting to show how credit constraints affect a society’s demand for government spending on human capital policies, namely, policies that increase the returns to human capital investments. The main result of the model is that a reduction in credit constraints can increase the share of government spending on such policies, with a greater increase in poorer societies. We also provide suggestive cross-country evidence in support of our model by showing that the share of government spending on public education and health is negatively related to measures of credit constraints, with a stronger negative relation in poorer societies.

Suggested Citation

  • Camargo, Braz & Stein, Guilherme, 2022. "Credit constraints and human capital policies," Journal of Public Economics, Elsevier, vol. 208(C).
    • Handle: RePEc:eee:pubeco:v:208:y:2022:i:c:s0047272722000263
    DOI: 10.1016/j.jpubeco.2022.104624
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    Keywords

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    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • H40 - Public Economics - - Publicly Provided Goods - - - General
    • I00 - Health, Education, and Welfare - - General - - - General
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity

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