Search Results
Title: Inequality in Human Capital and Endogenous Credit Constraints
Resulting in 1 citation.
| 1. |
Hai, Rong Heckman, James J. |
|
Inequality in Human Capital and Endogenous Credit Constraints Review of Economic Dynamics 25 (April 2017): 4-36. Also: http://www.sciencedirect.com/science/article/pii/S1094202517300029 Cohort(s): NLSY97 Publisher: Society for Economic Dynamics Keyword(s): Age at First Intercourse; Armed Services Vocational Aptitude Battery (ASVAB); Behavior, Violent; Cognitive Ability; Credit/Credit Constraint; Debt/Borrowing; Educational Attainment; Human Capital; Net Worth; Parental Investments; Wealth Permission to reprint the abstract has not been received from the publisher. This paper investigates the determinants of inequality in human capital with an emphasis on the role of the credit constraints. We develop and estimate a model in which individuals face uninsured human capital risks and invest in education, acquire work experience, accumulate assets and smooth consumption. Agents can borrow from the private lending market and from government student loan programs. The private market credit limit is explicitly derived by extending the natural borrowing limit of Aiyagari (1994) to incorporate endogenous labor supply, human capital accumulation, psychic costs of working, and age. We quantify the effects of cognitive ability, noncognitive ability, parental education, and parental wealth on educational attainment, wages, and consumption. We conduct counterfactual experiments with respect to tuition subsidies and enhanced student loan limits and evaluate their effects on educational attainment and inequality. We compare the performance of our model with an influential ad hoc model in the literature with education-specific fixed loan limits. We find evidence of substantial life cycle credit constraints that affect human capital accumulation and inequality. The constrained fall into two groups: those who are permanently poor over their lifetimes and a group of well-endowed individuals with rising high levels of acquired skills who are constrained early in their life cycles. Equalizing cognitive and noncognitive ability has dramatic effects on inequality. Equalizing parental backgrounds has much weaker effects. Tuition costs have weak effects on inequality. Note: Previously published as NBER Working Paper No. 22999, December 2016. |
|
|
Bibliography Citation
Hai, Rong and James J. Heckman. "Inequality in Human Capital and Endogenous Credit Constraints." Review of Economic Dynamics 25 (April 2017): 4-36.
|