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Author: Monge-Naranjo, Alexander
Resulting in 2 citations.
1. Lochner, Lance John
Monge-Naranjo, Alexander
Credit Constraints in Education
Working Paper No. 17435, National Bureau of Economic Research, September 2011.
Also: http://www.nber.org/papers/w17435
Cohort(s): NLSY79, NLSY97
Publisher: National Bureau of Economic Research (NBER)
Keyword(s): College Education; Credit/Credit Constraint; Education; Family Income; Human Capital

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.

Bibliography Citation
Lochner, Lance John and Alexander Monge-Naranjo. "Credit Constraints in Education." Working Paper No. 17435, National Bureau of Economic Research, September 2011.
2. Lochner, Lance John
Monge-Naranjo, Alexander
The Nature of Credit Constraints and Human Capital
American Economic Review 101,6 (October 2011): 2487-2529.
Also: http://www.aeaweb.org/articles.php?doi=10.1257/aer.101.6.2487
Cohort(s): NLSY79, NLSY97
Publisher: American Economic Association
Keyword(s): College Education; Credit/Credit Constraint; Debt/Borrowing; Family Income; Human Capital; Modeling; Student Loans

Permission to reprint the abstract has not been received from the publisher.

We develop a human capital model with borrowing constraints explicitly derived from government student loan (GSL) programs and private lending under limited commitment. The model helps explain the persistent strong positive correlation between ability and schooling in the United States, as well as the rising importance of family income for college attendance. It also explains the increasing share of undergraduates borrowing the GSL maximum and the rise in student borrowing from private lenders. Our framework offers new insights regarding the interaction of government and private lending, as well as the responsiveness of private credit to economic and policy changes. (JEL D14, H52, I22, I23, J24)
Bibliography Citation
Lochner, Lance John and Alexander Monge-Naranjo. "The Nature of Credit Constraints and Human Capital." American Economic Review 101,6 (October 2011): 2487-2529.