A failure of the market for college education and on-the-job human capital

Felipe Balmaceda ()

Economics of Education Review, 2021, vol. 84, issue C

Abstract: This paper shows that a competitive labor market fails to provide first-best incentives to invest in general human capital and this has distributive consequences: college students and firms underinvest in human capital, and this is more pronounced for high-skill students with low-income parents. Long-term contracts, together with privately provided wage-contingent loans, cannot restore efficiency and eliminate the distributive consequences of this labor market failure. Government student loans together with firm subsidies to human capital investments fully solve the market failure.

Keywords: General skills; Hold-up; Credit constraints; Wage floors; Credit access; Subsidies (search for similar items in EconPapers)
JEL-codes: D2 J3 J30 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecoedu:v:84:y:2021:i:c:s0272775721000844

DOI: 10.1016/j.econedurev.2021.102165

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