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Credit Constraints and Demand for Higher Education: Evidence from Financial Deregulation

Author

Listed:
  • Stephen Teng Sun

    (Guanghua School of Management, Peking University)

  • Constantine Yannelis

    (Stanford University)

Abstract

We use staggered banking deregulation across states in the United States to examine the impact of the resulting increased credit supply on college enrollment from the 1970s to the early 1990s. Our research design produces estimates that are not confounded by wealth effects due to changes in income or housing wealth. We find that lifting banking restrictions raises college enrollment by about 2.6 percentage points (4.9%). We rule out alternative interpretations by examining results for different income groups and bankrupt households. We also find similar effects for two-year or four-year college completion and supporting evidence in household educational borrowing.

Suggested Citation

  • Stephen Teng Sun & Constantine Yannelis, 2016. "Credit Constraints and Demand for Higher Education: Evidence from Financial Deregulation," The Review of Economics and Statistics, MIT Press, vol. 98(1), pages 12-24, March.
  • Handle: RePEc:tpr:restat:v:98:y:2016:i:1:p:12-24
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    Citations

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    Cited by:

    1. Geng, Xin & Janssens, Wendy & Kramer, Berber, 2018. "Liquid milk: Cash Constraints and Recurring Savings among Dairy Farmers in Kenya," 2018 Annual Meeting, August 5-7, Washington, D.C. 273823, Agricultural and Applied Economics Association.
    2. Grossman, Gene M. & Helpman, Elhanan & Oberfield, Ezra & Sampson, Thomas, 2017. "The productivity slowdown and the declining labor share: a neoclassical exploration," LSE Research Online Documents on Economics 86597, London School of Economics and Political Science, LSE Library.
    3. Patrick Reilly, 2016. "Bank Branching Deregulation and High School Graduation," Working Papers 16-29, Department of Economics, West Virginia University.
    4. Sarena Goodman & Adam Isen & Constantine Yannelis, 2018. "A Day Late and a Dollar Short : Liquidity and Household Formation among Student Borrowers," Finance and Economics Discussion Series 2018-025, Board of Governors of the Federal Reserve System (US).
    5. Popov, Alexander, 2017. "Evidence on finance and economic growth," Working Paper Series 2115, European Central Bank.
    6. repec:eee:jetheo:v:178:y:2018:i:c:p:551-594 is not listed on IDEAS
    7. Anindo Sarker & Bulent Unel, 2017. "The Impact of Bank Expansion on Self-Employed Business Owners: Evidence from US States," Departmental Working Papers 2017-06, Department of Economics, Louisiana State University.

    More about this item

    JEL classification:

    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs
    • J38 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Public Policy
    • H52 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Education
    • H81 - Public Economics - - Miscellaneous Issues - - - Governmental Loans; Loan Guarantees; Credits; Grants; Bailouts
    • I22 - Health, Education, and Welfare - - Education - - - Educational Finance; Financial Aid
    • I28 - Health, Education, and Welfare - - Education - - - Government Policy
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation

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