Economics at your fingertips  

Welfare Effects of Privatizing Public Education When Human Capital Investments Are Risky

Fabian Kindermann

Journal of Human Capital, 2012, vol. 6, issue 2, 87 - 123

Abstract: In an overlapping-generations model with risky human capital investment, borrowing constraints, and intergenerational transmission of abilities, I examine the effects of a change from publicly to privately funded college education. I find that from this reform, college graduates are better off compared to other workers since the college wage premium increases by around 50 percent. The reform deteriorates aggregate efficiency by (i) enforcing liquidity constraints, (ii) abolishing public insurance provision against educational risk, and (iii) increasing utility costs of college education via intergenerational spillovers. A success-dependent student loan system can offset efficiency losses but fails to generate efficiency gains.

Date: 2012
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10) Track citations by RSS feed

Downloads: (external link) (application/pdf) (text/html)
Access to the online full text or PDF requires a subscription.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link:

Access Statistics for this article

More articles in Journal of Human Capital from University of Chicago Press
Bibliographic data for series maintained by Journals Division ().

Page updated 2019-04-10
Handle: RePEc:ucp:jhucap:doi:10.1086/666524