Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/70330
Authors: 
Lochner, Lance
Monge-Naranjo, Alexander
Year of Publication: 
2012
Series/Report no.: 
CIBC Working Paper 2012-1
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 imposition 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 offers new insights about the design of government policy.
Subjects: 
Human Capital
Incentive Problems
Government Loans
Early Investments
Social Mobility
JEL: 
D14
H52
I22
I23
J24
Document Type: 
Working Paper

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