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The Changing Role of Family Income and Ability in Determining Educational Achievement

  • Philippe Belley
  • Lance Lochner

We use the National Longitudinal Survey of Youth 1979 and 1997 cohorts to estimate the effects of ability and family income on educational attainment in the early 1980s and early 2000s. The effects of family income on college attendance increase substantially over this period. Cognitive ability strongly affects schooling outcomes in both periods. We develop an educational choice model that incorporates both borrowing constraints and a “consumption value†of schooling. The model cannot explain the rising effects of family income on college attendance in response to rising costs and returns to college without appealing to borrowing constraints.

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File URL: http://dx.doi.org/10.1086/524674
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Article provided by University of Chicago Press in its journal Journal of Human Capital.

Volume (Year): 1 (2007)
Issue (Month): 1 ()
Pages: 37-89

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Handle: RePEc:ucp:jhucap:v:1:i:1:y:2007:p:37-89
Contact details of provider: Web page: http://www.journals.uchicago.edu/JHC/

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  1. James J. Heckman & Lance J. Lochner & Petra E. Todd, 2005. "Earnings Functions, Rates of Return and Treatment Effects: The Mincer Equation and Beyond," NBER Working Papers 11544, National Bureau of Economic Research, Inc.
  2. Flavio Cunha & James J. Heckman & Lance Lochner & Dimitriy V. Masterov, 2005. "Interpreting the Evidence on Life Cycle Skill Formation," NBER Working Papers 11331, National Bureau of Economic Research, Inc.
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  4. Philippe Belley & Lance Lochner, 2007. "The Changing Role of Family Income and Ability in Determining Educational Achievement," Journal of Human Capital, University of Chicago Press, vol. 1(1), pages 37-89.
  5. David Card & Thomas Lemieux, 2000. "Can Falling Supply Explain the Rising Return to College for Younger Men? A Cohort-Based Analysis," NBER Working Papers 7655, National Bureau of Economic Research, Inc.
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  7. Chinhui Juhn, 2003. "Labor Market Dropouts and Trends in the Wages of Black and White Men," ILR Review, Cornell University, ILR School, vol. 56(4), pages 643-662, July.
  8. Lance Lochner & Alexander Monge-Naranjo, 2002. "Human Capital Formation with Endogenous Credit Constraints," NBER Working Papers 8815, National Bureau of Economic Research, Inc.
  9. James Heckman & Lance Lochner & Christopher Taber, 1998. "Explaining Rising Wage Inequality: Explanations With A Dynamic General Equilibrium Model of Labor Earnings With Heterogeneous Agents," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 1(1), pages 1-58, January.
  10. Keane, Michael P & Wolpin, Kenneth I, 2001. "The Effect of Parental Transfers and Borrowing Constraints on Educational Attainment," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 42(4), pages 1051-1103, November.
  11. Dynarski, Susan M. & Scott–Clayton, Judith E., 2006. "The Cost of Complexity in Federal Student Aid: Lessons from Optimal Tax Theory and Behavioral Economics," National Tax Journal, National Tax Association, vol. 59(2), pages 319-56, June.
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  14. Murnane, Richard J & Willett, John B & Levy, Frank, 1995. "The Growing Importance of Cognitive Skills in Wage Determination," The Review of Economics and Statistics, MIT Press, vol. 77(2), pages 251-66, May.
  15. Stephen V. Cameron & Christopher Taber, 2004. "Estimation of Educational Borrowing Constraints Using Returns to Schooling," Journal of Political Economy, University of Chicago Press, vol. 112(1), pages 132-182, February.
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  18. Dick Andrew W. & Edlin Aaron S. & Emch Eric R., 2003. "The Savings Impact of College Financial Aid," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 2(1), pages 1-31, June.
  19. Stephen V. Cameron & James J. Heckman, 2001. "The Dynamics of Educational Attainment for Black, Hispanic, and White Males," Journal of Political Economy, University of Chicago Press, vol. 109(3), pages 455-499, June.
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  21. Lisa Barrow & Cecilia Elena Rouse, 2005. "Do returns to schooling differ by race and ethnicity?," Working Paper Series WP-05-02, Federal Reserve Bank of Chicago.
  22. Todd R. Stinebrickner & Ralph Stinebrickner, 2007. "The Effect of Credit Constraints on the College Drop-Out Decision A Direct Approach Using a New Panel Study," NBER Working Papers 13340, National Bureau of Economic Research, Inc.
  23. John Cawley & James Heckman & Edward Vytlacil, 1998. "Understanding the Role of Cognitive Ability in Accounting for the Recent Rise in the Economic Return to Education," NBER Working Papers 6388, National Bureau of Economic Research, Inc.
  24. Cunha, Flavio & Heckman, James, 2008. "A New Framework For The Analysis Of Inequality," Macroeconomic Dynamics, Cambridge University Press, vol. 12(S2), pages 315-354, September.
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