Credit Constraints in Education

Lance Lochner and Alexander Monge-Naranjo

No 17435, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We review studies of the impact of credit constraints on the accumulation of human capital. Evidence suggests that credit constraints are increasingly important for schooling and other aspects of households' behavior. We highlight the importance of early childhood investments, since their response largely determines the impact of credit constraints on the overall lifetime acquisition of human capital. We also review the intergenerational literature and examine the macroeconomic impacts of credit constraints on social mobility and the income distribution. A common limitation across all areas of the human capital literature is the imposition of ad hoc constraints on credit. We propose a more careful treatment of the structure of government student loan programs as well as the incentive problems underlying private credit. We show that endogenizing constraints on credit for human capital helps explain observed borrowing, schooling, and default patterns and offers new insights about the design of government policy.

JEL-codes: D14 H52 I22 I23 J24 (search for similar items in EconPapers)
Date: 2011-09
New Economics Papers: this item is included in nep-lab
Note: CH ED LS PE
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Citations: View citations in EconPapers (27)

Published as Lance Lochner & Alexander Monge-Naranjo, 2012. "Credit Constraints in Education," Annual Review of Economics, Annual Reviews, vol. 4(1), pages 225-256, 07.

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Journal Article: Credit Constraints in Education (2012)
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