IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper

Credit Constraints in Education

  • Lance Lochner

    ()

    (University of Western Ontario)

  • Alexander Monge-Naranjo

    ()

    (University of Pennsylvania)

We review studies of the impact of credit constraints on the accumulation of human capital. Evidence suggests that credit constraints are increasingly important for schooling and other aspects of households' behavior. We highlight the importance of early childhood investments, since their response largely determines the impact of credit constraints on the overall lifetime acquisition of human capital. We also review the intergenerational literature and examine the macroeconomic impacts of credit constraints on social mobility and the income distribution. A common limitation across all areas of the human capital literature is the imposition of ad hoc constraints on credit. We propose a more careful treatment of the structure of government student loan programs as well as the incentive problems underlying private credit. We show that endogenizing constraints on credit for human capital helps explain observed borrowing, schooling, and default patterns and offers new insights about the design of government policy.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://humcap.uchicago.edu/RePEc/hka/wpaper/Lochner_Monge-Naranjo_2011_credit-constraints-education.pdf
File Function: First version, August 16, 2011
Download Restriction: no

Paper provided by Human Capital and Economic Opportunity Working Group in its series Working Papers with number 2011-036.

as
in new window

Length:
Date of creation: Aug 2011
Date of revision:
Publication status: Forthcoming in Annual Review of Economics
Handle: RePEc:hka:wpaper:2011-036
Note: M
Contact details of provider: Web page: http://www.hceconomics.org/
Email:


More information through EDIRC

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Carneiro, Pedro & Heckman, James J. & Vytlacil, Edward, 2010. "Estimating Marginal Returns to Education," IZA Discussion Papers 5275, Institute for the Study of Labor (IZA).
  2. Michele Boldrin & Ana Montes, 2004. "The intergenerational state: education and pensions," Staff Report 336, Federal Reserve Bank of Minneapolis.
  3. Hanushek, Eric & Charles Ka Yui Leung & Kuzey Yilmaz, 2002. "Redistribution through Education and Other Transfer Mechanisms," Royal Economic Society Annual Conference 2002 94, Royal Economic Society.
  4. Michael F. Lovenheim & C. Lockwood Reynolds, 2011. "Changes in Postsecondary Choices by Ability and Income: Evidence from the National Longitudinal Surveys of Youth," Journal of Human Capital, University of Chicago Press, vol. 5(1), pages 70 - 109.
  5. Ralph Stinebrickner & Todd Stinebrickner, 2008. "The Effect of Credit Constraints on the College Drop-Out Decision: A Direct Approach Using a New Panel Study," American Economic Review, American Economic Association, vol. 98(5), pages 2163-84, December.
  6. Flavio Cunha & James Heckman & Susanne Schennach, 2010. "Estimating the technology of cognitive and noncognitive skill formation," CeMMAP working papers CWP09/10, Centre for Microdata Methods and Practice, Institute for Fiscal Studies.
  7. Belley, Phillippe & Lochner, Lance, 2009. "The Changing Role of Family Income and Ability in Determining Educational Achievement," CLSSRN working papers clsrn_admin-2009-9, Vancouver School of Economics, revised 02 Feb 2009.
  8. Elizabeth M. Caucutt & Krishna B. Kumar, 2000. "Higher Education Subsidies and Heterogeneity, A Dynamic Analysis," RCER Working Papers 472, University of Rochester - Center for Economic Research (RCER).
  9. Robert Shimer & Iván Werning, 2005. "Liquidity and insurance for the unemployed," Staff Report 366, Federal Reserve Bank of Minneapolis.
  10. Daniela Del Boca & Christopher Flinn & Matthew Wiswall, 2010. "Household Choices and Child Development," Working Papers 2011-039, Human Capital and Economic Opportunity Working Group.
  11. Dennis Epple & Richard Romano & Holger Sieg, 2006. "Admission, Tuition, and Financial Aid Policies in the Market for Higher Education," Econometrica, Econometric Society, vol. 74(4), pages 885-928, 07.
  12. Lance J. Lochner & Alexander Monge-Naranjo, 2008. "The Nature of Credit Constraints and Human Capital," NBER Working Papers 13912, National Bureau of Economic Research, Inc.
  13. Timothy J Kehoe & David K Levine, 1993. "Debt Constrained Asset Markets," Levine's Working Paper Archive 1276, David K. Levine.
  14. Meta Brown & John Karl Scholz & Ananth Seshadri, 2009. "A New Test of Borrowing Constraints for Education," NBER Working Papers 14879, National Bureau of Economic Research, Inc.
  15. Oded Galor & Joseph Zeira, 1993. "Income Distribution and Macroeconomics," Review of Economic Studies, Oxford University Press, vol. 60(1), pages 35-52.
  16. Carneiro, Pedro & Heckman, James J., 2002. "The Evidence on Credit Constraints in Post-Secondary Schooling," IZA Discussion Papers 518, Institute for the Study of Labor (IZA).
  17. Michael P. Keane & Kenneth I. Wolpin, 1995. "The career decisions of young men," Working Papers 559, Federal Reserve Bank of Minneapolis.
  18. Felicia Ionescu, 2011. "Risky Human Capital and Alternative Bankruptcy Regimes for Student Loans," Journal of Human Capital, University of Chicago Press, vol. 5(2), pages 153 - 206.
  19. Cunha, Flavio & Heckman, James J. & Navarro, Salvador, 2004. "Separating Uncertainty from Heterogeneity in Life Cycle Earnings," IZA Discussion Papers 1437, Institute for the Study of Labor (IZA).
  20. Diego Restuccia & Carlos Urrutia, 2002. "Intergenerational Persistence of Earnings: The Role of Early and College Education," University of Western Ontario, Economic Policy Research Institute Working Papers 20024, University of Western Ontario, Economic Policy Research Institute.
  21. Løken, Katrine Vellesen & Mogstad, Magne & Wiswall, Matthew, 2011. "What Linear Estimators Miss: The E ects of Family Income on Child Outcomes," Working Papers in Economics 02/11, University of Bergen, Department of Economics.
  22. Hector Chade & Gregory Lewis & Lones Smith, 2014. "Student Portfolios and the College Admissions Problem," Review of Economic Studies, Oxford University Press, vol. 81(3), pages 971-1002.
  23. Jesus Fernandez-Villaverde & Dirk Krueger, 2004. "Consumption and Saving over the Life Cycle: How Important are Consumer Durables?," 2004 Meeting Papers 357b, Society for Economic Dynamics.
  24. Susan M. Dynarski & Judith E. Scott-Clayton, 2006. "The Cost of Complexity in Federal Student Aid: Lessons from Optimal Tax Theory and Behavioral Economics," NBER Working Papers 12227, National Bureau of Economic Research, Inc.
  25. S. Rao Aiyagari, 1993. "Uninsured idiosyncratic risk and aggregate saving," Working Papers 502, Federal Reserve Bank of Minneapolis.
  26. N. Gregory Mankiw & David Romer & David N. Weil, 1992. "A Contribution to the Empirics of Economic Growth," The Quarterly Journal of Economics, Oxford University Press, vol. 107(2), pages 407-437.
  27. Lang, Kevin, 1993. "Ability Bias, Discount Rate Bias and the Return to Education," MPRA Paper 24651, University Library of Munich, Germany.
  28. Aiyagari, S. Rao & Greenwood, Jeremy & Seshadri, Ananth, 2002. "Efficient Investment in Children," Journal of Economic Theory, Elsevier, vol. 102(2), pages 290-321, February.
  29. Reint Gropp & John Karl Scholz & Michelle J. White, 1997. "Personal Bankruptcy and Credit Supply and Demand," The Quarterly Journal of Economics, Oxford University Press, vol. 112(1), pages 217-251.
  30. Satyajit Chatterjee & Dean Corbae & Makoto Nakajima & Jose-Victor Rios-Rull, 2007. "A quantitative theory of unsecured consumer credit with risk of default," Working Papers 07-16, Federal Reserve Bank of Philadelphia.
  31. Igor Livshits & James MacGee & Michele Tertilt, 2003. "Consumer bankruptcy: a fresh start," Working Papers 617, Federal Reserve Bank of Minneapolis.
  32. Glomm, Gerhard & Ravikumar, B, 1992. "Public versus Private Investment in Human Capital Endogenous Growth and Income Inequality," Journal of Political Economy, University of Chicago Press, vol. 100(4), pages 818-34, August.
  33. Mariacristina deNardi, 2000. "Wealth Inequality and Intergenerational Links," Econometric Society World Congress 2000 Contributed Papers 0547, Econometric Society.
  34. Córdoba, Juan Carlos & Ripoll, Marla, 2013. "What explains schooling differences across countries?," Journal of Monetary Economics, Elsevier, vol. 60(2), pages 184-202.
  35. 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.
  36. Philippe Belley & Marc Frenette & Lance Lochner, 2011. "Post-Secondary Attendance by Parental Income in the U.S. and Canada: What Role for Financial Aid Policy?," NBER Working Papers 17218, National Bureau of Economic Research, Inc.
  37. repec:pit:wpaper:392 is not listed on IDEAS
  38. Akee, Randall K. Q. & Copeland, William & Keeler, Gordon & Angold, Adrian & Costello, Jane E., 2008. "Parents’ Incomes and Children’s Outcomes: A Quasi-Experiment," IZA Discussion Papers 3520, Institute for the Study of Labor (IZA).
  39. Kevin Milligan & Mark Stabile, 2008. "Do Child Tax Benefits Affect the Wellbeing of Children? Evidence from Canadian Child Benefit Expansions," NBER Working Papers 14624, National Bureau of Economic Research, Inc.
  40. Peter Klenow & Andrés Rodríguez-Clare, 1997. "The Neoclassical Revival in Growth Economics: Has It Gone Too Far?," NBER Chapters, in: NBER Macroeconomics Annual 1997, Volume 12, pages 73-114 National Bureau of Economic Research, Inc.
  41. Elizabeth Caucutt & Lance Lochner, 2004. "Early and Late Human Capital Investments, Credit Constraints, and the Family," 2004 Meeting Papers 129, Society for Economic Dynamics.
  42. Yongseok Shin & Joe Kaboski & Francisco J. Buera, 2008. "Finance and Development: A Tale of Two Sectors," 2008 Meeting Papers 955, Society for Economic Dynamics.
  43. Ananth Seshadri & Rodolfo Manuelli, 2005. "Human Capital and the Wealth of Nations," 2005 Meeting Papers 56, Society for Economic Dynamics.
  44. David Andolfatto & Martin Gervais, 2004. "Human Capital Investment and Debt Constraints," Labor and Demography 0412006, EconWPA.
  45. Salvador Navarro, 2011. "Using Observed Choices to Infer Agent's Information: Reconsidering the Importance of Borrowing Constraints, Uncertainty and Preferences in College Attendance," University of Western Ontario, Centre for Human Capital and Productivity (CHCP) Working Papers 20118, University of Western Ontario, Centre for Human Capital and Productivity (CHCP).
  46. Alexander Monge-Naranjo, 2009. "Entrepreneurship and firm heterogeneity with limited enforcement," Annals of Finance, Springer, vol. 5(3), pages 465-494, June.
  47. Elizabeth M. Caucutt & Lance Lochner, 2005. "Borrowing constraints on families with young children," Proceedings, Federal Reserve Bank of Cleveland, pages 39-48.
  48. Satyajit Chatterjee & Felicia Ionescu, 2010. "Insuring student loans against the risk of college failure," Working Papers 10-31, Federal Reserve Bank of Philadelphia.
  49. Michael F. Lovenheim, 2011. "The Effect of Liquid Housing Wealth on College Enrollment," Journal of Labor Economics, University of Chicago Press, vol. 29(4), pages 741 - 771.
  50. Tom Krebs, 2003. "Human Capital Risk and Economic Growth," The Quarterly Journal of Economics, Oxford University Press, vol. 118(2), pages 709-744.
  51. Rui Albuquerque & Hugo A. Hopenhayn, 2004. "Optimal Lending Contracts and Firm Dynamics," Review of Economic Studies, Oxford University Press, vol. 71(2), pages 285-315.
  52. Eric P. Bettinger & Bridget Terry Long & Philip Oreopoulos & Lisa Sanbonmatsu, 2009. "The Role of Simplification and Information in College Decisions: Results from the H&R Block FAFSA Experiment," NBER Working Papers 15361, National Bureau of Economic Research, Inc.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:hka:wpaper:2011-036. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Jennifer Pachon)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.