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The Evidence on Credit Constraints in Post-Secondary Schooling

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  • Carneiro, Pedro

    (University College London)

  • Heckman, James J.

    (University of Chicago)

Abstract

This paper examines the family income—college enrollment relationship and the evidence on credit constraints in post-secondary schooling. We distinguish short-run liquidity constraints from the long-term factors that promote cognitive and noncognitive ability. Long-run factors crystallized in ability are the major determinants of the family income—schooling relationship, although there is some evidence that up to 8% of the U.S. population is credit constrained in a short-run sense. Evidence that IV estimates of the returns to schooling exceed OLS estimates is sometimes claimed to support the existence of substantial credit constraints. This argument is critically examined.

Suggested Citation

  • Carneiro, Pedro & Heckman, James J., 2002. "The Evidence on Credit Constraints in Post-Secondary Schooling," IZA Discussion Papers 518, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp518
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    More about this item

    Keywords

    human capital; return to education; credit constraints;
    All these keywords.

    JEL classification:

    • I28 - Health, Education, and Welfare - - Education - - - Government Policy
    • D33 - Microeconomics - - Distribution - - - Factor Income Distribution
    • H43 - Public Economics - - Publicly Provided Goods - - - Project Evaluation; Social Discount Rate

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