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The Evidence on Credit Constraints in Post-Secondary Schooling

  • Pedro Carneiro
  • James J. Heckman

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.

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File URL: http://www.nber.org/papers/w9055.pdf
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 9055.

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Date of creation: Jul 2002
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Publication status: published as Carneiro, P. and J. J. Heckman. "The Evidence On Credit Constraints In Post-Secondary Schooling," Economic Journal, 2002, v112(482,Oct), 705-734.
Handle: RePEc:nbr:nberwo:9055
Note: CH LS PE ED
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  1. Hansen, Karsten T. & Heckman, James J. & Mullen, Kathleen, 2003. "The Effect of Schooling and Ability on Achievement Test Scores," IZA Discussion Papers 826, Institute for the Study of Labor (IZA).
  2. 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.
  3. Meghir, Costas & Palme, Mårten, 1999. "Assessing the Effect of Schooling on Earnings Using a Social Experiment," SSE/EFI Working Paper Series in Economics and Finance 313, Stockholm School of Economics.
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  6. Griliches, Zvi, 1977. "Estimating the Returns to Schooling: Some Econometric Problems," Econometrica, Econometric Society, vol. 45(1), pages 1-22, January.
  7. Carneiro, Pedro & Hansen, Karsten T & Heckman, James J, 2002. "Removing the veil of ignorance in assessing the distributional impacts of social policies," Working Paper Series 2002:2, IFAU - Institute for Evaluation of Labour Market and Education Policy.
  8. Edward Vytlacil, 2002. "Independence, Monotonicity, and Latent Index Models: An Equivalence Result," Econometrica, Econometric Society, vol. 70(1), pages 331-341, January.
  9. Black, Dan A. & Smith, J.A.Jeffrey A., 2004. "How robust is the evidence on the effects of college quality? Evidence from matching," Journal of Econometrics, Elsevier, vol. 121(1-2), pages 99-124.
  10. Heckman, James J, 1995. "Lessons from the Bell Curve," Journal of Political Economy, University of Chicago Press, vol. 103(5), pages 1091-1120, October.
  11. Taber, Christopher R, 2001. "The Rising College Premium in the Eighties: Return to College or Return to Unobserved Ability?," Review of Economic Studies, Wiley Blackwell, vol. 68(3), pages 665-91, July.
  12. David Card, 1994. "Earnings, Schooling, and Ability Revisited," Working Papers 710, Princeton University, Department of Economics, Industrial Relations Section..
  13. 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.
  14. James Heckman, 2000. "Policies to Foster Human Capital," Working Papers 0028, Harris School of Public Policy Studies, University of Chicago.
  15. Sattinger, Michael, 1978. "Comparative Advantage in Individuals," The Review of Economics and Statistics, MIT Press, vol. 60(2), pages 259-67, May.
  16. Shea, John, 2000. "Does parents' money matter?," Journal of Public Economics, Elsevier, vol. 77(2), pages 155-184, August.
  17. James J. Heckman & Edward Vytlacil, 2005. "Structural Equations, Treatment Effects and Econometric Policy Evaluation," NBER Technical Working Papers 0306, National Bureau of Economic Research, Inc.
  18. Carneiro, Pedro & Heckman, James J., 2003. "Human Capital Policy," IZA Discussion Papers 821, Institute for the Study of Labor (IZA).
  19. 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.
  20. Stephen V. Cameron & James J. Heckman, 1998. "Life Cycle Schooling and Dynamic Selection Bias: Models and Evidence for Five Cohorts of American Males," Journal of Political Economy, University of Chicago Press, vol. 106(2), pages 262-333, April.
  21. Dynarski, Susan, 2000. "Hope for Whom? Financial Aid for the Middle Class and Its Impact on College Attendance," National Tax Journal, National Tax Association, vol. 53(n. 3), pages 629-62, September.
  22. Arulampalam, W. & Robin A. Naylor & Jeremy P. Smith, 2002. "University of Warwick," Royal Economic Society Annual Conference 2002 9, Royal Economic Society.
  23. James J. Heckman & Lance J. Lochner & Petra E. Todd, 2003. "Fifty Years of Mincer Earnings Regressions," NBER Working Papers 9732, National Bureau of Economic Research, Inc.
  24. Susan Dynarski, 2000. "Hope for Whom? Financial Aid for the Middle Class and Its Impact on College Attendance," NBER Working Papers 7756, National Bureau of Economic Research, Inc.
  25. 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.
  26. Altonji, Joseph G & Dunn, Thomas A, 1996. "The Effects of Family Characteristics on the Return to Education," The Review of Economics and Statistics, MIT Press, vol. 78(4), pages 692-704, November.
  27. Card, David, 1999. "The causal effect of education on earnings," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 30, pages 1801-1863 Elsevier.
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