Credit Constraints in Education

Lance Lochner and Alexander Monge-Naranjo

No 20121, University of Western Ontario, Centre for Human Capital and Productivity (CHCP) Working Papers from University of Western Ontario, Centre for Human Capital and Productivity (CHCP)

Abstract: We review studies of the impact of credit constraints on the accumulation of human capital. Evidence suggests that credit constraints have recently become 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 impo- sition of ad hoc constraints on credit. We propose a more careful treatment of the structure of government student loan programs and 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 o®ers new in- sights about the design of government policy.

Keywords: Human Capital; Incentive Problems; Government Loans; Early Investments; Social Mobility (search for similar items in EconPapers)
JEL-codes: D14 H52 I22 I23 J24 (search for similar items in EconPapers)
Date: 2012
New Economics Papers: this item is included in nep-edu and nep-lab
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Citations: View citations in EconPapers (131)

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Related works:
Journal Article: Credit Constraints in Education (2012)
Working Paper: Credit Constraints in Education (2011)
Working Paper: Credit Constraints in Education (2011)
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