Working Paper: NBER ID: w17435
Authors: Lance Lochner; Alexander Mongenaranjo
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. \n \nA 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.
Keywords: credit constraints; education; human capital; social mobility
JEL Codes: D14; H52; I22; I23; J24
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| credit constraints (E51) | lower levels of human capital accumulation (J24) |
| credit constraints (E51) | lower college attendance rates (D29) |
| early childhood investments (J13) | lifetime human capital outcomes (J24) |
| credit constraints during early education (I24) | lifetime human capital outcomes (J24) |
| relaxing credit constraints (E51) | enhanced educational attainment (I24) |