Educational Policy in a Credit Constrained Economy with Skill Heterogeneity

John Fender and Ping Wang

No 133, Vanderbilt University Department of Economics Working Papers from Vanderbilt University Department of Economics

Abstract: An overlapping-generations model where agents choose whether to become educated when young is presented. Education enhances productivity, but needs to be financed by borrowing. Because of the possibility of default, lenders may ration credit. We characterize the steady-state equilibrium with and without credit constraints and show that credit constraints are associated with lower education and a lower real interest rate. We then study the role of public policy in remedying the inefficiency which occurs with credit market imperfections and examine whether public education can improve on the constrained equilibrium.

Keywords: Education; credit constraints; public policy (search for similar items in EconPapers)
JEL-codes: E62 H52 (search for similar items in EconPapers)
Date: 2001-12
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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http://www.accessecon.com/pubs/VUECON/vu01-w33.pdf First version, 2001 (application/pdf)

Related works:
Journal Article: Educational Policy in a Credit Constrained Economy with Skill Heterogeneity (2003)
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Persistent link: https://EconPapers.repec.org/RePEc:van:wpaper:0133

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