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Early and Late Human Capital Investments, Credit Constraints, and the Family

  • Elizabeth Caucutt
  • Lance Lochner

We develop a lifecycle human capital investment model in an overlapping generations environment. Investments in human capital can be made at different ages and are subject to different constraints on the individual and family. We explore empirical evidence on the complementarity of investments at early and late ages as well as the role of credit constraints in determining these investments. Using calibration and estimation, we parameterize a theoretical model and explore the impacts of various intervention policies, including subsidies and loans for human capital investment at different ages. The results speak to the importance of considering the response of both early and late human capital investments in determining the full response to government policies. They also incorporate substitution and complementarity between parental expenditures and government expenditures on investment in an altruistic family environment. Thus, family and individual decision rules depend on the policy environment.

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Paper provided by Society for Economic Dynamics in its series 2004 Meeting Papers with number 129.

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Date of creation: 2004
Date of revision:
Handle: RePEc:red:sed004:129
Contact details of provider: Postal: Society for Economic Dynamics Marina Azzimonti Department of Economics Stonybrook University 10 Nicolls Road Stonybrook NY 11790 USA
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