Learn Now, Save Later: College and Household Portfolios

Urvi Neelakantan, Felicia Ionescu and Kartik Athreya
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Felicia Ionescu: Federal Reserve Board

No 804, 2015 Meeting Papers from Society for Economic Dynamics

Abstract: Households invest substantially in human capital, especially early in life, through participation in formal higher education. Later in life, they primarily invest in financial assets. Formal educational investments are lumpy and illiquid, financial investments are not. Both are risky. We show that in the presence of short-sale constraints on risky financial assets alone, the characteristics of formal education, including the cost of debt-finance, have strong effects on financial portfolios throughout life. Conversely, we show that changes in the rate of return on financial wealth can exert substantial influence on human capital investment decisions.

Date: 2015
New Economics Papers: this item is included in nep-dge and nep-edu
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Persistent link: https://EconPapers.repec.org/RePEc:red:sed015:804

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