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Testing for Educational Credit Constraints using Heterogeneity in Individual Time Preferences

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  • Benjamin W. Cowan

Abstract

I develop a model in which individual time discount rates have a larger e ect on hu- man capital accumulation when credit constraints are binding. Impatient individuals obtain less schooling when borrowing constraints limit the ability to nance consump- tion during school. Using data from the NLSY79, I show that self-reported measures of time preferences have a signi cantly higher e ect on the college attendance decisions of blacks than those of whites and the decisions of low-income youths than those of high- income youths. These results provide new evidence that members of disadvantaged groups obtain lower levels of schooling because they are credit constrained.

Suggested Citation

  • Benjamin W. Cowan, 2014. "Testing for Educational Credit Constraints using Heterogeneity in Individual Time Preferences," Carlo Alberto Notebooks 345, Collegio Carlo Alberto.
  • Handle: RePEc:cca:wpaper:345
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    File URL: http://www.carloalberto.org/assets/working-papers/no.345.pdf
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    References listed on IDEAS

    as
    1. Charles Courtemanche & Garth Heutel & Patrick McAlvanah, 2015. "Impatience, Incentives and Obesity," Economic Journal, Royal Economic Society, vol. 125(582), pages 1-31, February.
    2. O. Ashenfelter & D. Card (ed.), 1999. "Handbook of Labor Economics," Handbook of Labor Economics, Elsevier, edition 1, volume 3, number 3.
    3. Lawrance, Emily C, 1991. "Poverty and the Rate of Time Preference: Evidence from Panel Data," Journal of Political Economy, University of Chicago Press, vol. 99(1), pages 54-77, February.
    4. Saul Pleeter & John T. Warner, 2001. "The Personal Discount Rate: Evidence from Military Downsizing Programs," American Economic Review, American Economic Association, vol. 91(1), pages 33-53, March.
    5. 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.
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    More about this item

    JEL classification:

    • I22 - Health, Education, and Welfare - - Education - - - Educational Finance; Financial Aid
    • I23 - Health, Education, and Welfare - - Education - - - Higher Education; Research Institutions

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