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Education and Borrowing Constraints: Tests vs Prices

Raquel Fernandez ()

Working Papers from C.V. Starr Center for Applied Economics, New York University

Abstract: This paper examines the properties of exams and markets as alternative allocation devices under borrowing constraints. Exmas dominate markets in terms of matching efficiency. Whether aggregate consumption is greater under exams than under markets depends on the power of the exam technology; for a sufficiently powerful test, exams dominate markets in terms of aggregate consumption as well. The positive effects of income taxation are analyzed and the optimal allocation scheme when welath is observable is derived.

Keywords: EDUCATION; MARKETS; TESTS; BORROWING (search for similar items in EconPapers)
JEL-codes: D52 E44 J41 (search for similar items in EconPapers)
Pages: 34 pages
Date: 1998
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Working Paper: Education and Borrowing Constraints: Tests Vs. Prices (1998) Downloads
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